Inflation hit the 2% level in January, but started to falter again due to oil prices… Government: “Rise of around 3% in the first half of the year”
Even with economic recovery, improvement in domestic demand may be delayed… Interest rate cut ‘desperate’ despite real estate PF insolvency
Apple prices rise ahead of the holidays
(Seoul = Yonhap News) Reporter Kim Seong-min = Ahead of the Lunar New Year holiday, prices of agricultural products such as fruits and vegetables have soared. According to the National Statistics Portal of the National Statistical Office on the 4th, the consumer price index for agricultural, livestock and fishery products in January was 122.71, up 8.0% from the same month last year. The increase rate by fruit item was apples at 56.8%, followed by peaches at 48.1%, pears at 41.2%, tangerines at 39.8%, persimmons at 39.7%, and chestnuts at 7.3%.
In the photo, merchants are selling apples at Gyeongdong Market in Dongdaemun-gu, Seoul on the morning of the 4th. 2024.2.4 ksm7976@yna.co.kr
(Sejong = Yonhap News) Reporter Min Gyeong-rak and Park Jae-hyun = Although the consumer price inflation rate fell to the 2% range in the new year, the prevailing view is that the rate of increase will increase again in the first half of the year.
This is because fruit prices are still high despite the government’s best efforts, and even international oil prices have recently shown unstable trends.
As perceived prices are expected to continue at a high level for the time being, there are concerns that the slump in consumption and investment may last longer than expected.
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‘I’ve been farming for 14 years, but I’ve never seen anything like this before.’
(Cheongyang = Yonhap News) Reporter Kang Soo-hwan = On the afternoon of the 16th, the owner of the farm is looking at the apple tree farm that has been flooded in Daeheung-ri, Cheongnam-myeon, Cheongyang-gun, Chungcheongnam-do, where water has swept away since the night before due to the collapse of the embankment near the drainage field. Due to heavy rain that lasted for three days, the water reached the height of the apple trees until early morning, but when the rain stopped, the water receded. 2023.7.16 swan@yna.co.kr
◇ Despite a significant slowdown in the inflation rate, food prices fell slightly from 6.1 to 6.0%.
According to the National Statistics Portal of the National Statistical Office on the 12th, food prices rose 6.0% last month compared to a year ago. This is more than twice the overall consumer price increase (2.8%).
Food price inflation is slowing, but it is slow and has been in the 6% range for four months. Last month’s consumer price inflation rate fell by 0.4 percentage points (p) compared to the previous month (3.2%), but food prices only fell by 0.1 percentage points.
Food prices are driven by fruits such as apples and pears. Last month, fruit prices rose 26.9%, the largest increase since January 2011 (31.2%). The contribution of fruit prices to the overall inflation rate (2.8%) was 0.4%p, the highest since January 2011.
The high price of fruit is mainly due to supply shortage due to abnormal temperatures last year. Some fruits, such as apples, are not easy to import due to concerns about the spread of pests and diseases, so fruit prices are likely to remain strong until summer fruit shipments.
The prices of other foods other than fruit are also high. Milk, cheese, and eggs (4.9%), vegetables, seaweed (8.1%), and snacks, ice cream, and sugar (5.8%), which constitute food prices, also exceeded the overall inflation rate last month.
Gas station gas prices rise for the first time in 17 weeks… “On the rise for the time being”
(Seoul = Yonhap News) Reporter Ryu Hyo-rim = Due to the rise in international oil prices, the average weekly selling price of gasoline and diesel at domestic gas stations has turned upward for the first time in 17 weeks. According to Korea National Oil Corporation’s oil price information system Offinet on the 3rd, the average selling price of gasoline at gas stations nationwide in the fifth week of January (January 28 to February 1) was 1,579 won per liter, up 15.3 won from the previous week. The photo shows a gas station in downtown Seoul on the afternoon of the 4th. 2024.2.4 ryousanta@yna.co.kr
◇ International oil prices are rising… The ‘normalization’ of fuel taxes is also a factor in putting pressure on prices.
In a situation where food prices are high, international oil price uncertainty has recently increased, which appears to be putting pressure on prices.
The price of Dubai oil, which fell to $77.3 per barrel in December last year, rebounded to $82.4 due to growing unrest in the Middle East, including the recent attack on a U.S. military base in Jordan by pro-Iranian militants.
It is against this background that the Bank of Korea and the Ministry of Strategy and Finance simultaneously formalized the possibility of a price rebound immediately after the announcement of prices, even though consumer prices fell to the 2% range last month for the first time in six months.
Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok predicted at a price-related ministerial meeting held immediately after the announcement of consumer prices in January on the 2nd, “Prices in February and March may rise again to around 3%.”
Kim Woong, Deputy Governor of the Bank of Korea, also mentioned oil price instability and high living costs on the same day, saying, “As the price slowdown slows down for the time being, we cannot rule out the possibility that the consumer price inflation rate will rise somewhat temporarily.”
The fact that oil prices were falling in February last year is also cited as a factor in increasing the price index increase next month in terms of base effect.
A government official predicted, “The international oil prices that have risen since mid-January will be reflected in prices in February with a lag,” and added, “The rise rate of around 3% will continue until the first half of the year.”
The fact that the fuel tax cut cannot be extended indefinitely is also a factor in putting pressure on prices.
The government has extended the fuel tax cut in 2-4 month increments from 2022 to 2022 due to reasons such as high oil prices. It is highly likely that the fuel tax cut, which ends on the 29th of this month, will be temporarily extended due to uncertainty in oil prices. However, given that it was initially a temporary measure, many point out that it should now be normalized to secure fiscal space.
Kyu-cheol Jeong, head of the economic outlook department at the Korea Development Institute (KDI), said, “The factor causing the rise in prices is oil prices,” and added, “If the fuel tax is normalized at some point, the impact of rising prices will be inevitable.”
Bank of Korea Governor Lee Chang-yong attends the Monetary Policy Committee press conference
(Seoul = Yonhap News) Bank of Korea Governor Lee Chang-yong is speaking at a press conference regarding the Monetary Policy Committee interest rate decision held at the Bank of Korea in Jung-gu, Seoul on the 11th. 2024.1.11 [사진공동취재단] photo@yna.co.kr
◇ Consumption and investment trapped in high inflation… How long will ‘high interest rate tightening’ last?
The cumulative price burden since the transition to the COVID-19 pandemic is being pointed out as the main cause of restraining private consumption and investment.
This is why there are observations that if high prices, especially food and oil prices, continue, the recovery of domestic demand may be delayed.
If the slowdown in prices slows down, the high interest rate tightening policy may last longer than expected, further restricting domestic demand.
According to the minutes of the first meeting of the Monetary Policy Committee of the new year held on the 11th of last month, most of the Monetary Policy Committee members are in the position that “the austerity stance must be maintained until it is certain that prices will settle at 2%.”
As side effects of high interest rates, such as poor real estate project financing (PF), appear, calls for an interest rate cut are loud, but high prices still appear to be holding back interest rates. This is why both the government and the market are paying attention to the pace of price slowdown.
Joo Won, head of the economic outlook department at Hyundai Research Institute, said, “The prices of fresh food and other items have not fallen sufficiently, so perceived prices are still high. Only when prices fall can there be room for interest rates to be lowered and investment to be stimulated.”
[표] Monthly consumer price index/grocery index increase rate
Point Total Index Grocery January 2024 2.8% 6.0% December 2023 3.2% 6.1% November 3.3% 6.3% October 3.8% 6.9% September 3.7% 5.3% August 3.4% 4.9% July 2.4% 3.4%
※ Source: Statistics Korea National Statistics Portal
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2024/02/12 06:31 Sent
2024-02-11 21:31:11
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