South Korea’s consumer prices rose at the fastest pace in almost 24 years in July mainly due to high energy and food prices, official data revealed on Tuesday.

Consumer prices soared 6.3 per cent last month from a year earlier, accelerating from a 6 per cent on-year spike in June, according to the data from Statistics Korea.

It marked the sharpest on-year increase since November 1998, when consumer inflation jumped 6.8 per cent. The inflation rate stayed in the 6 percent range for the second straight month, reports Yonhap News Agency.

Consumer prices rose above 2 per cent — the central bank’s inflation target over the medium term — for the 16th straight month in July.

The statistics agency said prices of petroleum products and personal services continued their fast growth in July.

“Prices of farm products and those of electricity, gas and water supplies also picked up,” Eo Woon-sun, a senior Statistics Korea official, told reporters.

He said the growth of consumer prices may slow in August and September, given the base effect, but forecast annual inflation is likely to surpass 5 per cent if the current trends continue.

Inflationary pressure has built up as crude oil and other commodity prices rose due to the protracted war between Russia and Ukraine, and global supply disruptions.

A recovery in demand from the Covid pandemic also exerted upward pressure on prices.

Last month, prices of petroleum products jumped 35.1 per cent on-year due to high fuel costs. South Korea depends mainly on imports for its energy needs.

But the July reading decelerated from a 39.6 per cent on-year rise in June, as the growth of oil prices slowed amid a global economic downturn.

Prices of agricultural, livestock and fisheries goods rose 7.1 per cent on-year, picking up from a 4.8 per cent rise the previous month. Vegetable prices jumped 25.9 per cent amid frequent rain and heat waves.

A recovery in demand and the lifting of major virus curbs also pushed up prices of personal services, which rose 6 per cent, the fastest in over 24 years. The costs of dining out soared 8.4 per cent, the highest in 30 years.

Core inflation, which excludes volatile food and oil prices, climbed 3.9 per cent on-year last month.

In July, prices of daily necessities — 141 items closely related to people’s daily lives, such as food, clothing and housing — jumped 7.9 per cent on-year.

Rising inflationary pressure is building the case for the Bank of Korea (BOK) to maintain its monetary tightening stance in the coming months.

Last month, the BOK delivered an unprecedented 0.5 percentage-point rate hike to 2.25 per cent in a bid to curb inflation.

It marked the sixth rate increase since August last year.

South Korea has also faced the risk of stagflation, a mix of slowing growth and high inflation, due to heightened external economic uncertainty.

The BOK has put its 2022 growth forecast at 2.7 per cent and expected consumer prices to rise 4.5 per cent this year.

Global credit appraiser S&P Global Ratings forecast South Korea’s inflation to jump 5 per cent in 2022.

(The story has been published via a syndicated feed)