SEOUL (Yonhap) -- South Korea's consumer prices surged 3.1 percent in May from a year earlier, marking the sharpest increase in 26 months, driven by a significant jump in oil prices amid the Middle East conflict, the statistics office said Tuesday.
The consumer price index reached 119.92 (2020=100) last month, the highest since March 2024 when it also recorded a 3.1 percent rise, according to data from Statistics Korea.
This marks the first time the inflation rate has returned to the 3 percent range since March 2024. The inflation rate had fallen to 2.0 percent in January and February after reaching 2.3 percent in December, but it began to climb again to 2.2 percent in March and 2.6 percent in April, before jumping 0.5 percentage points in a month.
The surge in international oil prices due to the Middle East conflict directly impacted the inflation rate. Oil product prices soared 24.2 percent, pushing the overall price index up by 0.92 percentage points. This is the highest increase in oil product prices since July 2022, when they rose 35.2 percent during the early stages of the Russia-Ukraine war.
Gasoline prices rose 23.1 percent and diesel prices jumped 33.3 percent, the largest increases since July 2022 (25.5 percent for gasoline, 47.0 percent for diesel). Kerosene prices also saw their biggest jump since February 2023, rising 21.7 percent.
Consequently, industrial product prices as a whole increased by 4.2 percent, contributing 1.40 percentage points to the overall inflation. Processed food prices, however, rose by a more modest 0.8 percent.
Service prices also climbed 2.8 percent, adding 1.56 percentage points to the overall inflation, reaching their highest level since December 2023.
International airfare prices skyrocketed by 33.5 percent, the largest increase since statistics began in 1995, largely due to higher fuel surcharges. Prices for items using oil as a raw material, such as home repair materials (5.0 percent), engine oil change fees (14.0 percent), and laundry fees (11.3 percent), also saw significant increases.
Prices for non-dining personal services rose 4.4 percent. Travel-related costs, including overseas group tours (26.3 percent) and car rentals (25.7 percent), also showed a marked increase due to high demand during the recent holiday period.
Dining prices increased by 2.6 percent.
The Ministry of Economy and Finance estimated that policy efforts, such as the oil product price cap and fuel tax cuts, had lowered the consumer price inflation rate by 0.6 percentage points last month. Without these measures, the inflation rate would have reached 3.7 percent.
Consumer price inflation is expected to remain in the 3 percent range for the time being. The government believes the full impact of the Middle East conflict has yet to be reflected in overall price increases.
"Given that rising oil prices could have an impact, there don't seem to be any major factors that would significantly change the 3 percent inflation rate for the time being," a ministry official said.
The official added, "It is difficult to see the price increases spreading to various items, so it is hard to say that the impact of the Middle East conflict has fully permeated."
Living costs, which reflect price changes for frequently purchased items and are closely watched by the Bank of Korea, also rose significantly. The living cost index increased by 3.3 percent, the largest jump in 25 months, since April 2024.
Prices for non-food items in personal services rose 4.2 percent, the highest since February 2023. Food prices increased by 2.1 percent.
Bank of Korea Gov. Shin Hyun-song noted the inflationary pressures during a Monetary Policy Committee meeting on April 28. "Looking at various channels such as corporate household decisions and wages, the core inflation in April was 2.2 percent, but other price indicators suggest there were inflationary pressures," he said. "The living cost index can be seen as having the most direct impact on inflation expectations, and this figure was 2.9 percent in April."
The fresh food index, which reflects 'table prices,' decreased by 1.4 percent.
The index excluding food and energy, a key indicator for inflation according to OECD standards, rose 2.5 percent, reaching its highest level since February 2024.
Agricultural, livestock, and fishery products increased by 2.2 percent, reversing a decline seen in March and April. Statistics Korea attributed the rise in agricultural products to a lower base effect from a 4.7 percent drop a year earlier and reduced shipments due to recent high temperatures.
While prices for hairtail (15.1 percent), rice (13.5 percent), and eggs (10.2 percent) saw significant increases, prices for cabbage (-43.9 percent), radish (-27.5 percent), and onions (-18.5 percent) declined.
"Considering the slowdown in processed food price increases and the rise in agricultural, livestock, and fishery products, the impact of the Middle East conflict has not yet spread to other sectors," said Lee Doo-won, director of Statistics Korea's economic trend statistics review. "However, considering the time lag in supply-side effects, it will be necessary to continue monitoring in the second half of the year."
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