SEJONG, Feb. 2 (Korea Bizwire) - South Korea’s consumer prices grew less than 1 percent for the first time in three months, a government report showed Tuesday, rekindling concerns about deflation.
The country’s consumer price index rose 0.8 percent last month from a year earlier, a 0.5 percentage point fall from December’s 1.3 percent gain, according to the report by Statistics Korea.
The figure had remained below the 1 percent level for 11 straight months until October last year but hit 1 percent in November and 1.3 percent in December.
Core inflation, which excludes volatile oil and food prices, increased 1.9 percent compared with last year, down 0.9 percentage point from a year ago.
Statistics Korea attributed the sharp drop in the price index to the end of a cigarette price hike effect, which contributed 0.58 percentage point throughout last year.
The Seoul government spiked the price of tobacco by 2,000 won (US$1.66) per pack starting at the beginning of 2015 for public health and fiscal reasons.
“As the effect of the cigarette price hike ended in January, the index lost more than 0.5 percentage point,” said Woo Young-jae, director of the price statistics division at the statistical bureau.
Prices of petroleum products fell 10.3 percent on-year to drag down the entire price index by 0.43 percentage point last month amid a global low oil price trend.
However, the service sector, including public bills, jumped to a four-year high of 2.4 percent last year, offsetting the steep decline in cigarettes and petroleum goods.
The report also showed that the “living necessities” price index, which measures the cost of key products that people consume on a daily basis, gained 0.2 percent on-year last month, down from a 0.6 percent rise in December.’
The finance ministry said downward pressure on consumer prices, such as falling oil costs, will likely soften down the road.
“The consumer price index will face eased downside risks in the coming months on an expected rebound in oil prices,” the finance ministry said in a release, citing a market forecast that crude oil prices would gradually rise in 2016 to reach $40 in the second half.
“The government will strengthen monitoring of global oil prices and weather conditions that have a great impact on the price index.”