Korea: Consumer price inflation surges in September

Owing to price hikes in agricultural and oil products, consumer prices rose 1.5 percent in September from the previous month, marking the biggest monthly climb this year, the Ministry of Finance and Economy said yesterday.

The figure indicates a 3.9 percent rise year-on-year, 3.5 percent from the end of last year, and 2.1 percent for the first nine months, nearing the 2.5 percent yearly inflation target for the year.

The September inflation rate was higher than market expectations for a rise of about 3 percent. The high increase, coming in the heels of the Thursday announcement of unexpectedly strong growth in industrial output in August, will put the Bank of Korea in a dilemma.

Citing the continuing instability in the financial markets, the bank has so far refrained from raising the overnight call rate. But the surge in inflation in September leaves little room for the bank to delay, an analyst said.

Ministry officials, however, played down the high inflation figure in September, attributing it mostly to the price of agricultural products which shot up 5.5 percent in the wake of two large typhoons.

Some economists also said that despite the higher-than-expected inflation figure, it isn't clear whether this will compel the bank to raise short-term interest rates in October.

The ministry said that it still sees little inflationary pressure stemming from domestic demand. It also said it expects month-on-month inflation to decline in the fourth quarter and that it still believes the average annual rate of inflation in 2000 will be contained to within the ministry's target of around 2.5 percent.

Prices for everyday Korean table items skyrocketed this month. The price of squash, for example, rose 270.5 percent, unripe red pepper 87.9 percent and leek 87.9 percent.

Public service charges also rose 2.6 percent, mostly on account of steep hikes in medical diagnosis fees (23.7 percent), prescription and injection charges (23.3 percent) and railway fees (18.2 percent).

Owing to international oil price hikes, the price of gasoline rose 2.6 percent, kerosene 5.5 percent, and propane gas 3.3 percent. These rises caused the price of factory-produced goods to increase 0.6 percent on month in September, after a 1 percent increase in August.

Producer prices, meanwhile, climbed 2.5 percent in September from a year earlier, versus a year-on-year rise of 2.5 percent in August.

Core inflation, which excludes oil and food prices, rose 0.7 percent in September, compared with 0.6 percent in August.

Housing rentals rose 0.2 percent and personal services 0.1 percent.

"If not for external and seasonal factors, which affected the price of agricultural, fisheries and livestock products, medical fees and oil products, inflation in September rose 0.14 percent from the previous month," said Oh Kap-won, a senior finance ministry official.

"Rise in global oil prices remains a cause for worry. But we should be able to achieve the 2.5 percent yearly inflation target for the year once prices of agricultural products are stabilized again," Oh said.

http://www.koreaherald.co.kr/news/2000/09/__05/20000930_0508.htm

-- Carl Jenkins (Somewherepress@aol.com), September 29, 2000