South Korea’s inflation rose faster than expected in May, reaching its fastest annual pace in nearly 14 years.
The consumer price index (CPI) rose 5.4% in May from a year before, according to Statistics Korea data. That was faster than the 4.8% rise the previous month and above the 5.1% tipped in a Reuters poll.
It was also the fastest annual growth in consumer prices since August 2008 and above the central bank’s 2% target for the 14th consecutive month.
“Inflation is becoming a growing concern in Korea, amid further signs that underlying price pressures are starting to build,” Gareth Leather, a senior Asian economist at Capital Economics, said.
“We expect more tightening by the Bank of Korea over the coming months,” he added.
Retail Sales Decline
Core consumer prices, which exclude volatile food and energy, rose 3.4%, marking the fastest rise since February 2009.
April retail sales declined 0.2% over the previous month, mainly driven by a sharp decline in pharmaceutical consumption (which fell 12.5%) as the number of new Covid-19 cases decreased.
“Other than the consumption of medicines, durable and semi-durable consumption rebounded,” said Min Joo Kang, senior economist, South Korea and Japan, at ING.
Industrial production in April was weak due to sharp declines in manufacturing and public administration activity.
Manufacturing production in April fell 3.3% over the previous month at a seasonally adjusted rate versus consensus expectations for a fall of only 1.3%.
“China’s lockdown and global supply chain disruptions dragged down Korean manufacturing production and investment while local re-opening supported services, construction, and consumption activity,” Kang said.
“We expect gross domestic product to slow further in the second quarter of 2022 but to rebound in the second half of the year,” she added.
Prime Minister Han Duck-soo said on Friday the country will lift its quarantine requirement for foreign arrivals without vaccination from June 8, Yonhap News Agency reported, in a move expected to boost tourism and business travel.
- Reuters, with additional editing by George Russell