South Korea’s inflation rate gained 6 percent on year against the year-ago period in June for the first time in 24 years as expensive commodity imports pushed up prices across the board from groceries to service charges.

According to Statistics Korea on Tuesday, the country’s consumer price index (CPI) jumped 6.0 percent year over year to 108.22 in June in the steepest rise since 6.8 percent in November 1998 when the country was recovering from a near-default crisis in the wake of Asian currency debacle.

The inflation rate of the country heavily reliant on fuel and other commodity imports has been picking up from the second half last year on supply shortage from sudden recovery from pandemic and added speed this year to rise above 4 percent in March and then 5 percent in May following Russian invasion of Ukraine.

In the first half, inflation gain averaged at 4.6 percent to suggest the country may end the year with an annual rate above 5 percent as price buildup is likely to last throughout the year.

The main stock index Kospi rose 1.7 percent and Kosdaq 3 percent Tuesday morning as authorities have already warned of inflation in 6 percent rate during the summer and after the U.S. eased tariffs on Chinese imports to fight inflation.

The core CPI that excludes volatile food and energy factors rose 4.4 percent in June, the sharpest since 4.5 percent in March 2009.

The headline inflation was fueled by rises in the cost of industrial goods and services.

Prices of industrial goods including petroleum (39.6 percent) and processed foods (7.9 percent) soared 9.3 percent year over year in June. Prices of diesel surged 50.7 percent on year in June, gasoline 31.4 percent, liquefied petroleum gas (LPG) 29.1 percent, and bread 9.2 percent.

Prices of agricultural, livestock and fishery products rose 4.8 percent on year in June. Prices of pork increased 18.6 percent, import beef 27.2 percent, grapes 31.4 percent, cabbage 35.5 percent, chicken 20.1 percent, potatoes 37.8 percent, rice 12.6 percent, and sweet potatoes 31.6 percent.

Electricity, water, and gas prices rose 9.6 percent on year to cause 5.8 percent rises in individual service prices and 8.0 percent in the cost of dining out rose 8.0 percent. Prices of public service rose 0.7 percent and rent price 1.9 percent.

Living necessaries price index jumped 7.4 percent from a year ago, the highest since 10.4 percent in November 1998.

“Inflation further rose due to higher demand for utility and vegetables in hotter-than-usual June,” said Eo Woon-seon, an official from Statistics Korea. “Consumer prices may keep accelerating above 6 percent under current conditions.”

The Ministry of Economy and Finance in a separate release Tuesday noted that supply factors contributed to higher inflation in June. The prices of agriculture, livestock, and fisheries contributed 0.42 percentage point to CPI in June, up from 0.37 percentage point in May on a rise in production cost and import prices. It warned that high inflation will persist for a while due to a surge in energy and grain prices from Russia’s invasion of Ukraine and global supply chain issues.

The market has factored in accelerated hikes in the interest rate in line with the stronger inflationary buildup – starting with a 50-basis point raise during next week’s monetary policy meeting.

By Lee Eun-joo

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