Signal of Stagflation

With a continuous rise in the consumer prices in South Korea, concerns are on the rise over the possibility of stagflation.
With a continuous rise in the consumer prices in South Korea, concerns are on the rise over the possibility of stagflation.

 

It has been found that consumer prices in South Korea rose 1.3% from a year ago last month. For reference, the same rate of increase was recorded in February and October this year and that for September was 1.2%. Under the circumstances, concerns are on the rise over the possibility of stagflation.

The consumer price index for living necessaries rose 1.1% from a year earlier, too. This rate of increase is the highest since July 2014. Above all, the fresh food price index soared by 15%. It showed an increase of no less than 20.5% in September due to heat waves and droughts and increased by 15.4% in the following month.

Likewise, service prices rose 1.8% to raise the overall consumer prices by one percentage point. Sewerage charges, dining prices and apartment management expenses increased 10.9%, 11.4% and 3.6%, respectively.

During the past two years, the South Korean economy had to deal with the possibility of deflation amid low oil prices and a decline in total demand. Now, stagflation is taking the place. With OPEC member countries having agreed on oil production cut, international oil prices are likely to become one of the most important variables determining the rate of increase in consumer prices down the road. If the oil prices continue to rise, consumer prices in South Korea will show an increase of more than 2% and this can occur as soon as early next year.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution