Korea Inflation August 2022


Korea: Inflation plunges to lowest level since May in August

September 2, 2022

Inflation came in at 5.7% in August, down from July’s 6.3%. August's figure marked the lowest inflation rate since May. The reading was largely driven by a fall in prices for transportation. The trend pointed up, with annual average inflation coming in at 4.4% in August (July: 4.1%). Meanwhile, core inflation rose to 4.0% in August, from the previous month's 3.9%. Lastly, consumer prices dropped 0.11% in August over the previous month, swinging from July's 0.48% rise. August's result marked the weakest reading since October 2020.

Easing crude prices amid the extension of fuel tax cuts caused inflation to moderate in August. In addition, the continued stability of core inflation points to the recent slowdown in demand, consistent with the fall of the PMI deeper into contractionary territory in August. Inflation is expected to decelerate towards the end of the year as the BOK continues to raise interest rates.

ING’s Min Joo Kang commented on the outlook:

“We think inflation has now passed its peak but it will likely remain above 5% for the rest of the year. Firstly, there is a high possibility that the price of fresh food will rise due to bad weather as Super Typhoon Hinnamnor is expected to pass through the southern part of the Korean peninsula, a major agricultural area. Secondly, some staple manufactured foods, like instant noodles and bread are scheduled to rise after the Choseok holiday. Thirdly, utility fees such as city gas and electricity will rise again in October. Lastly, some local governments are also planning to increase service fees too.”

FocusEconomics panelists project inflation averaging 5.0% in 2022, which is up 0.2 percentage points from last month’s forecast, and 2.8% in 2023.


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Korea Inflation Chart

Korea Inflation August 2022

Note: Month-on-month and year-on-year changes of consumer price index in %.
Source: National Statistics Office of Korea (KOSTAT).

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