April Inflation Jumps 2.3%... Green Onion and Egg Prices Soar

April Consumer Price Trends... Q2 Inflation Rate Likely to Exceed Annual Target of '2%'

[Sejong=Asia Economy Reporter Son Seonhee] Last month, the inflation rate exceeded 2%, marking the largest increase in 3 years and 8 months. Due to poor crop yields and avian influenza (AI), prices of agricultural, livestock, and fishery products such as green onions and eggs continued to soar, and petroleum prices also jumped into double digits due to rising international oil prices.

According to the 'April Consumer Price Trends' released by Statistics Korea on the 4th, the consumer price index last month was 107.39, up 2.3% compared to the same month a year ago. This is the largest increase since August 2017 (2.5%). The inflation rate, which had remained in the 0% range last year, rose to 0.6% in January, 1.1% in February, and 1.5% in March this year, surpassing 2% last month. This is the first time since November 2018 that the inflation rate has exceeded the government's annual inflation stabilization target of 2%.

The rise in prices was driven by food products. Amid household difficulties caused by COVID-19, even the cost of meals was affected. Looking at price fluctuations by detailed product categories, agricultural products rose by 17.9%, livestock products by 11.3%, resulting in an overall 13.1% increase in agricultural, livestock, and fishery product prices. Agricultural products suffered from poor crop yields at the beginning of the year, and in the case of livestock products, production decreased due to the impact of AI, while demand increased for dining out and school meals.

Rent also rose by 1.2% during the same period, marking the largest increase since December 2017. Jeonse (long-term deposit lease) increased by 1.6%, and monthly rent rose by 0.7%. The increase in monthly rent is the largest in six and a half years since October 2014. The consumer perception index (living cost index), which is composed only of frequently purchased items sensitive to price changes, also rose from 1.5% to 2.8% over the past year.

Inflation is expected to continue until June. Especially in the second quarter, there is a high possibility that the inflation rate will exceed the government's target (2%). Eo Unseon, Director of Economic Trend Statistics at Statistics Korea, said, "While economic sentiment is improving centered on consumer sentiment, there have been inflationary factors from both supply and demand sides," adding, "There is also a base effect due to very low inflation in the second quarter of last year, so the upward trend may continue for some time."

However, as the harvest season for agricultural, livestock, and fishery products approaches and the number of laying hens is expected to recover to normal levels by June, the government forecasts that the inflation rate will narrow. International oil prices are also expected to stabilize in the $60 range in the second half of the year. The Ministry of Economy and Finance stated, "We will make every effort to manage prices stably so that temporary price increases do not spread into excessive inflation expectations."