As prices rise further in the second half of this year, rent and personal services will gradually add to the rise in agricultural products. Next year, prices of Chinese raw materials are expected to rise.
The inflation rate in December was 3.7%, showing an acceleration in the second half of the year from 0.9% in January to 1% in February, 2% in April, 3.2% in October, and 3.8% in November.
The Bank of Korea announced on the 29th that "in the case of intermediate goods (raw materials + capital goods) from China, the rise in import prices has not yet been fully reflected in consumer prices."
The Consumer Price Index of Statistics Korea in December was 104.04 (2020 = 100), up 3.7% from a year ago, and the December increase was for livestock and fishery products (7.8%), industrial products (4.7%), rent (2.0%) and personal services (3.4%). %) is added and the government controls the increase in electricity, gas and water after the next presidential election by 1.4% this December, so it is expected that inflation will accelerate next year.
The perceived price index of living expenses rose 3.2% from the previous year, the highest since 2011 (4.4%), and the consumer price index also rose 2.5% from last year, which is also the highest increase since 2011.
The government-controlled electricity, gas and water supply fell 2.1% due to city gas and electricity rate cuts, but a intensive increase is expected after the next election.
This year, services rose 2.0%, but personal services rose 3.4% in December, showing a gradual upward trend.
Livestock and fishery products, which are basic daily necessities, rose 8.7% this year, the highest rate since 2011 (9.2%), and industrial products rose 2.3%, the highest since 2012 (2.8%).
The upward trend of petroleum products (15.2%) will continue next year and is reflected in the rise in prices of domestic products and deterioration of the trade balance of exports.
The rise in oil prices increased the contribution of supply-side factors to prices, accounting for 53.2% of annual inflation this year.
The annual inflation rate of 2.5% this year is expected to have a greater impact than in 2011 (4.0%) right after the financial crisis as a short-term surge from 2019 (0.4%) and 2020 (0.5%).
On the 29th, the Bank of Korea reported on the ‘Ripple Impact of Chinese Prices in Considering the Import Structure of China’ in its report, “In the future, if international raw material prices continue to rise and supply bottlenecks continue to rise for a long time, if Chinese producer and export prices continue to rise for a long time, import prices will rise. “In particular, consumer goods imported from China and the five ASEAN countries (Indonesia, Thailand, Vietnam, the Philippines, and Malaysia) that use intermediate goods from China include many daily necessities with a high frequency of purchase. “We should be aware of the possibility that the high inflation rate in China may stimulate domestic inflation expectations,” he said.
The Bank of Korea said, “In the case of Chinese intermediate goods (raw materials + capital goods), the increase in import prices has not yet been fully reflected in consumer prices. As the increase in the unit price of imports of intermediate goods from China has not yet been clearly passed on to the price of domestic consumer goods, the burden of production costs on companies is increased and there is a possibility that it will act as an inflationary pressure in the future.” said.