Low Inflation Era... Jeonse Price Increase Rate Hits Highest in 2 Years

November Consumer Price Trends

Consumer Prices Rise in the 0% Range for Second Consecutive Month
Impact of Low Oil Prices and COVID-19
Monthly Rent Also Rises... Housing Cost Burden Increases

(Photo for reference)

[Sejong=Asia Economy Reporter Joo Sang-don] Last month, the consumer price inflation rate recorded 0.6%, remaining in the 0% range for two consecutive months. Although the inflation rate slightly increased as the effect of telecommunications fee support disappeared, low oil prices, a decrease in education expenses due to expanded free education, and a slowdown in the rise of dining-out prices caused by the COVID-19 pandemic limited the inflation increase. However, prices of fruits, which surged due to the rainy season and typhoons, continued to soar. The rate of increase in jeonse (long-term deposit rental) prices also hit the highest level since December 2018.

According to the 'November Consumer Price Trends' announced by Statistics Korea on the 2nd, the consumer price index was 105.50 (2015=100), up 0.6% compared to the same month last year. Although the inflation rate rose by 0.5 percentage points from the previous month (0.1%), the low inflation situation in the 0% range continued.

Lee Doo-won, head of the Price Trends Division at Statistics Korea, said, "As the telecommunications fee support effect, which was a downward factor in October, disappeared, the decline in public service prices narrowed (-6.6% → -2.0%), causing the consumer price inflation rate to increase from 0.1% to 0.6%. However, due to the decline in petroleum prices, public service support policies in the education sector, and the reduced rise in dining-out prices, the inflation rate remained low in the 0% range."

In fact, petroleum prices fell by 14.8% compared to the same period last year. Accordingly, industrial product prices dropped by 0.9%. Urban gas prices, linked to oil prices, decreased by 10.3%, causing electricity, water, and gas prices to fall by 4.1%. Additionally, high school tuition fees decreased by 74.4%, lowering public service prices by 2.0%. Dining-out prices rose by only 0.9%, compared to a 1.2% increase in November last year.

Despite these downward factors, agricultural, livestock, and fishery products and housing rents defended against 'negative inflation.' Agricultural, livestock, and fishery products rose by 11.1%, contributing to a 0.9% increase in commodity prices. Pork prices increased by 18.4%, and domestic beef by 10.5%. Particularly, the fresh food index, which is composed of 50 items with price fluctuations due to seasonal and weather conditions, jumped 13.1% compared to the same month last year. Apples surged by 36.4%, causing fresh fruit prices to rise by 25.1%, while fresh fish and fresh vegetables increased by 7.1% and 7.0%, respectively. Lee explained, "Fruit prices fell by 11.2% from the previous month as autumn supplies came in, but rose compared to the same month last year due to the base effect from the good harvest last year."

With jeonse prices rising, the housing cost burden also increased. While rents fell by 0.2% year-on-year in November last year, they rose by 0.6% in November this year. Both jeonse and monthly rents saw increased rates of rise. Jeonse rose from 0.6% in October to 0.8% in November this year, and monthly rent increased from 0.3% to 0.4%. The jeonse price increase rate is the highest in 23 months since December 2018 (0.9%).