Analysts are cautiously raising their heads as to whether the consumer price inflation rate in August has slowed for the first time in seven months, and whether the price point is nearing.
The expectation is that the negative base effect of high inflation in the third quarter of last year and the weakening of external variables such as oil prices will gradually ease the steep rise in prices.
However, at the moment, even if the price peaks, it is unlikely that the rate of increase will slow enough that the public will feel it. It is only that prices do not rise more steeply, but that the pain of high prices continues.
According to the consumer price trend released by the National Statistical Office on the 2nd, the consumer price increase rate in August compared to the same month of last year recorded 5.7%.
The absolute inflation rate of 5.7% is a level that causes tremendous pain to economic agents, but experts are giving meaning to the fact that it broke the inflationary expansion that had been going on for six months.
The consumer price inflation rate rose 3.7% in February compared to the same month last year, followed by 4.1% in March, 4.8% in April, and 5.4% in May. In June and July, they rose 6.0% and 6.3%, respectively, the highest level since November 1998 (6.8%) during the financial crisis.
Compared to the previous month, the trend of slowing inflation is more evident.
The consumer price index rose 0.1% in August compared to the previous month. It is the first time in nearly two years since November 2020 that the inflation rate has been negative compared to the previous month.
This contrasts with the growth rate of 0.5-0.7% from January to July of this year.
The slowdown in the inflation rate is due to the fall in international oil prices, which has been the main culprit for high inflation. The international oil price, which once soared to around $130 per barrel, is now trading at around $90 per barrel.
Oil prices rose 19.7% in August from a year ago, but the rate of increase was significantly lower than the 35.1% in the previous month.
If you look at the month-on-month ratio rather than the same month a year ago, petroleum prices fell 10.0%, the biggest drop since March 1998 (-15.1%).
This situation is reminiscent of the recent remarks of Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho that the rate of consumer price inflation will peak soon.
Deputy Prime Minister Choo predicted last month that “the consumer price inflation rate will move slightly sideways at the low 6% level and then gradually decrease.”
The inflation rate is expected to peak around Chuseok.
The fact that the consumer price inflation rate was high in the mid-3% range in the fourth quarter of last year creates a negative base effect, and the forecast is based on the expectation that the sharp rise in international oil and grain prices will gradually stabilize due to the Ukraine crisis.
“It seems to have peaked in July (6.3%),” said Joo Won, head of research at Hyundai Research Institute.
However, there is still a lot of uncertainty about the price peak theory.
“There is talk of a coalition of oil producers cutting oil production, it is difficult to predict the development of the Ukraine crisis, and exchange rate variables can also act as an upward factor in inflation,” said Eo Woon-seon, director of economic trend statistics at the National Statistical Office. The situation cannot be ruled out,” he said.
Kim Hee-jae, head of the price policy department at the Ministry of Strategy and Finance, said, “Inflationary factors such as increased demand during the holiday season and increased volatility of international raw material prices are still latent.”
This means that the rate of increase may increase again at any time.
The Bank of Korea (BOK) held an inflation check meeting on the same day and predicted that the August inflation rate was “at the expected level” and that “consumer price inflation will continue to rise in the 5-6 percent range for a considerable period of time.” The BOK expects the annual consumer price inflation rate to be 5.2% this year.
“At this rate, it may not be 5% per year,” said a deliberation official from Statistics Korea, citing the fact that the consumer price increase rate in August fell 0.1% from the previous month.
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