South Korea’s inflation rate in May was strongest in nine years amid price strengthening across the board from high commodity and food prices against pandemic-ridden year-ago period and revived demand from economic recovery.

According to Statistics Korea on Wednesday, the country’s consumer price index (CPI) rose 2.6 percent year over year to 107.46 in May to mark the steepest increase since April 2012.

The headline inflation has been picking up speed this year, adding 0.6 percent in January, 1.1 percent in February, 1.5 percent in March, and 2.3 percent in April.

The acceleration in May was driven by 12.1 percent in agricultural, livestock and fishery product prices in the aftermath of harvest depression and avian influenza.

Prices of agricultural goods soared 16.6 percent on year in May, with prices of green onions jumping 130.5 percent, eggs 45.4 percent, and rice 14 percent. Livestock prices also jumped 10.2 percent and fishery product prices 0.5 percent.

Prices of industrial goods gained 3.1 percent on rising international crude prices. Petroleum prices shot up 23.3 percent in May, marking the steepest increase since 27.8 percent in August 2008.

Prices of electricity, water, and gas, however, fell 4.8 percent on lower charges.

Prices of service soared 1.5 percent, with individual service price up 2.5 percent. Public service prices, however, fell 0.7 percent. Dining costs rose 2.1 percent on higher agricultural, livestock and fishery prices.

Housing price went up 1.3 percent from a year ago, marking the sharpest growth after 1.4 percent in November 2017. Jeonse, or lump-sum long-term lease price, increased 1.8 percent and monthly rent price 0.8 percent.

Living necessaries price index increased 3.3 percent from a year ago and fresh food price index 13 percent.

Eo Woon-sun, an official at Statistics Korea, said that petroleum prices surged from a year ago period when international oil prices slumped amid the Covid-19 crisis. Prices of agricultural, livestock, and fishery products also continued to rise as well as those of individual services on soaring materials costs.

Bank of Korea which revised up this year’s inflation outlook to 1.8 percent from 1.3 percent as well as economic growth estimate to 4.0 percent from 3.0 percent last week had warned of price strengthening in coming months before softening in the second half.

Even as the annual rate stays within its 2.0 percent target, the market is betting that central bank could move to tightening to fend off additional inflationary pressure amid signs of recovery in domestic demand.

Bond prices tumbled, with the yield on 10-year government bond gaining 2.2 basis points to 2.208 percent by midday Wednesday. The yields on three-year and five-year government bonds added 1.3 basis points and 1.7 basis points, respectively, to 1.226 percent and 1.743 percent.

By Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]