Consumer inflation slows to 41-month low in August

South Korea’s consumer prices slowed to the lowest level in nearly 3 1/2 years in August on easing prices of farm produce and global oil, data showed Tuesday.

Consumer prices, a key gauge of inflation, rose 2 percent on-year last month, compared with a 2.6 percent on-year rise a month earlier, according to the data from Statistics Korea.

August’s figure marked the slowest increase since March 2021, when consumer prices grew 1.9 percent.

It was also the fifth consecutive month that the price growth stayed below 3 percent.

In January, inflation slowed to 2.8 percent, dropping below 3 percent for the first time since July 2023, but edged up to 3.1 percent in February and stayed at the same level the following month before cooling to 2.9 percent in April.

The figure then fell to 2.5 percent in May and 2.4 percent in June before rising to 2.6 percent in July.

The government has said that the country is projected to reach the target rate of 2 percent by around the end of 2024.

The finance ministry expects this year’s prices to rise 2.6 percent.

“Inflationary pressure was very much weakened on falling global oil prices and the easing of farm produce prices,” agency official Kong Mi-sook said.

Prices of agricultural, livestock and fisheries products went up 2.4 percent on-year. Agricultural products, in particular, climbed 3.6 percent, markedly slowing from the previous month’s 9 percent increase.

But prices of fruits remained high, with those of apples surging 120.3 percent and prices of pears going up 17 percent.

“The country is experiencing a supply shortage of fruits due to poor harvests last year amid unfavorable weather conditions in summer, but prices are expected to be stabilized in the coming months,” Kong said.

Prices of petroleum products inched up 0.1 percent on-year in August, slowing from an 8.4 percent increase a month earlier, on stabilizing global oil prices.

Dubai crude, South Korea’s benchmark, came to US$77.60 per barrel on average last month, falling from July’s $83.83, according to government data.

Service prices gained 2.3 percent on-year in August.

Core inflation, which excludes volatile food and energy prices, added 2.1 percent, the weakest level since November 2021.

Prices of daily necessities — 144 items closely related to people’s everyday lives, such as food, clothing and housing — also climbed 2.1 percent last month, slowing from 3 percent growth in July, the data showed.

“Going forward, consumer inflation is expected to stabilize in the lower 2 percent range if there is not any additional shock from weather conditions or global oil prices,” First Vice Finance Minister Kim Beom-seok said during a vice ministerial meeting on prices.

Speaking of the economic situation, Kim said that the country is on a recovery track led by exports though small merchants and the people still experience difficulties, vowing to prioritize supporting the people and stabilizing prices.

Last month, the Bank of Korea (BOK) kept interest rates unchanged at 3.5 percent, the highest level in about 16 years, and Gov. Rhee Chang-yong said the decision was made in consideration of rising home prices and surging household debts despite weak domestic demand.

Some economists forecast a pivot in around October, though Lee said the BOK puts a focus on how to stabilize prices and ensure financial stability at the same time and it will take into consideration various economic indicators.