Consumer prices rise 3.1% year-on-year in May, highest in 26 months

SEOUL (Yonhap) -- South Korea's consumer prices rose at the fastest pace in 26 months in May, exceeding the 3 percent mark due to soaring oil prices amid the Middle East conflict.

The consumer price index stood at 119.92 in May, up 3.1 percent from a year earlier, according to data from Statistics Korea on Tuesday.

This marks the largest on-year increase since March 2024, when prices rose 3.1 percent due to poor harvests driving up agricultural product prices.

The 3 percent range for consumer price inflation is also the first since March 2024.

Consumer price inflation had fallen to 2.0 percent in January and February from 2.3 percent in December last year. It then rose to 2.2 percent in March and 2.6 percent in April, before jumping 0.5 percentage points in a month to reach the 3 percent level.

The surge in international oil prices due to the Middle East conflict directly impacted inflation.

Prices of oil products jumped 24.2 percent, pushing up the overall price index by 0.92 percentage points. The rate of increase for oil products was the highest since July 2022 (35.2 percent) during the early stages of the Russia-Ukraine war.

Gasoline (23.1 percent) and diesel (33.3 percent) also saw their largest increases since July 2022 (25.5 percent and 47.0 percent, respectively).

Kerosene prices also rose 21.7 percent, the largest increase since February 2023 (27.1 percent).

As a result, prices of manufactured goods as a whole rose 4.2 percent, contributing 1.40 percentage points to the overall price increase.

However, prices of processed foods rose only 0.8 percent.

Service prices also increased by 2.8 percent, pushing up the overall price index by 1.56 percentage points. The service price inflation rate was the highest since December 2023 (2.8 percent).

Notably, international airfares soared 33.5 percent due to increased fuel surcharges resulting from higher oil prices. This was the largest increase since statistics began to be compiled in 1995.

Items that use oil products as raw materials, such as home repair materials (5.0 percent), engine oil change fees (14.0 percent), and laundry fees (11.3 percent), also saw significant price increases due to the impact of rising oil prices.

Prices for non-dining personal services rose 4.4 percent.

During the recent holiday period, travel demand surged, leading to a notable increase in travel-related prices, including package tours abroad (26.3 percent) and passenger car rental fees (25.7 percent).

Dining-out prices, a component of personal services, rose 2.6 percent.

Prices of agricultural, livestock, and fishery products rose 2.2 percent, turning upward after a decline in March and April.

Statistics Korea explained that this increase was due to a base effect, as agricultural product prices had fallen 4.7 percent in the same month last year, and recent high temperatures reduced the supply of agricultural products.

While prices of hairtail (15.1 percent), rice (13.5 percent), and eggs (10.2 percent) saw significant increases, prices of cabbage (-43.9 percent), radish (-27.5 percent), and onions (-18.5 percent) declined.

"Considering the slowdown in processed food price increases and the smaller rise in agricultural, livestock, and fishery products, the impact of the Middle East war has not yet spread to other sectors," said Lee Du-won, director of the economic statistics division at Statistics Korea. "However, considering the time lag in supply-side effects, we need to continue to monitor the situation in the second half of the year."

The cost of living index, which reflects consumer sentiment based on frequently purchased items, rose 3.3 percent. This is the largest increase in 25 months, since April 2024 (3.6 percent).

Prices of non-food items rose 4.2 percent, the highest since February 2023 (4.5 percent). Food prices increased by 2.1 percent.

The cost of living index is a key indicator closely watched by the Bank of Korea in anticipation of interest rate hikes.

Shin Hyun-song, governor of the Bank of Korea, said at a Monetary Policy Committee meeting on May 28 that "considering various channels such as corporate household decision-making and wages, although core inflation in April was 2.2 percent, other price indicators suggest inflationary pressure existed." He added, "The cost of living index can be seen as having the most direct impact on expected inflation, and this figure was 2.9 percent in April."

The index for fresh food prices, which reflects "table prices," fell 1.4 percent.

The index for food and energy excluding items, a core inflation indicator based on OECD standards, rose 2.5 percent, marking the highest level since February 2024 (2.5 percent).

(Reporter Kim Soo-hyun, Ahn Chae-won, Song Jeong-eun) [email protected]