South Korea's consumer price inflation hits 4-year high on bird flu, expensive oil

 South Korea's consumer price inflation hit the highest in over four years as bird flu and expensive crude oil boosted the headline inflation, a government report showed on Thursday.

Consumer prices advanced 2.0 percent in January from a year earlier, marking the fastest monthly increase since October 2012, according to Statistics Korea.

The consumer price inflation, which stayed below 1 percent for four months through August last year, rebounded above 1 percent in September and rose to 2 percent in the first month of this year.

The rapid spread of bird flu resulted in a surge in egg prices. Tens of millions of chickens and ducks have been destroyed since a highly pathogenic strain of avian influenza (AI) was discovered in mid-November.

About one-third of total layer chickens, which lay eggs, were culled for the H5N6 virus infection. Egg price soared 61.9 percent in January from a year earlier, after rising 8.7 percent in December.

Prices for agricultural, livestock and fishery products climbed 8.5 percent, raising the overall headline inflation by 0.67 percentage points.

Prices for white radish surged 113 percent, with those for napa cabbage and carrot jumping 79 percent and 125 percent respectively.

Rebounding crude oil prices led to an 8.4 percent increase in oil product prices, which lifted the inflation by 0.36 percentage points.

Transport costs added 3.8 percent on higher oil prices, posting the fastest gain since June 2012. Industrial goods prices also rose 1.6 percent on expensive crude oil.

Services prices advanced 2.2 percent, lifting the overall headline inflation by 1.21 percentage points, but prices for electricity, tap water and natural pulled down the inflation by 0.35 percentage points.

Core consumer prices, which exclude volatile farm goods and oil products, rose 1.5 percent in January from a year ago. The OECD-method core prices, which exclude energy and food costs, gained 1.7 percent.

The so-called livelihood costs, which reflect prices of daily necessities, gained 2.4 percent, logging the highest rise since February 2012. It was caused by food costs that jumped 4.4 percent last month.

Fresh food prices, which include vegetables and fruits, surged 12.0 percent, keeping the double-digit growth since September last year. Fresh vegetable prices jumped 17.8 percent, leading the double-digit increase.

Despite the stronger upward pressure in the headline inflation, the Bank of Korea (BOK) is highly likely to keep a wait-and-see stance in its accommodative monetary policy on economic uncertainties at home and abroad.

South Korea's private consumption continued to weaken amid political unrest, caused by the impeachment of the president over the influence-peddling scandal.

Industrial production remained lackluster, though exports posted a double-digit expansion in January.

Households refrained from spending money amid higher debt-servicing burden. Market rates here turned upward as the U.S. Federal Reserve indicated three rate hikes this year following a quarter-percentage-point increase in its policy rate in December.

The BOK cut its benchmark rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June last year, increasing home-backed loans among households that led to the bubble forming in the real estate market.

source: Xinhua