South Korea’s consumer price stayed flat in June from a year ago, avoiding a second consecutive month of negative inflation partly thanks to cash handouts from the government to households.

The benchmark consumer price index (CPI) in June was 104.87, unchanged from the same month a year earlier, the Statistics Korea data showed Thursday. A month earlier, the country revisited sub-zero territory for the first time since September last year when the country experienced the first-ever negative inflation of 0.4 percent due to subdued demand under the coronavirus crisis.

Agricultural, livestock and fishery product prices rose 4.6 percent and pushed up the overall inflation by 0.35 percentage point as demand grew with a boost by the government’s cash handouts to spur consumer spending and relaxed social distancing rules.

Utility prices gained 1.3 percent. Service costs inched up 0.1 percent, with personal service costs increasing 1.0 percent.

Prices of industrial products, however, fell 1.4 percent and dragged down the headline inflation by 0.47 percentage point. In particular, petroleum prices plunged 15.4 percent.

“While the government’s cash aid appeared to have helped pushing up the consumer prices, its effect was somewhat muted in June,” said Ahn Hyung-joon, Statistics Korea official. “The stimulus effects will likely be reflected later as the consumer price index is a typical lagging indicator” that tends to have a delayed reaction to a change in the economy. Ahn noted that restaurant and hospitality service output jumped 14.4 percent while dining out prices rose by a mere 0.6 percent in June.

In June, core inflation, which excludes volatile agricultural product and oil prices for longer-term inflation trend judgment, gained 0.6 percent. The CPI without food and energy, the standard by the Organization for Economic Cooperation and Development (OECD), rose 0.2 percent.

By Cho Jeehyun

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