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Korea Inflation June 2023

Korea: Inflation falls to 21-month low in June

Inflation came in at 2.7% in June, which was down from May’s 3.3%. June’s result marked the lowest inflation rate since September 2021 and was slightly below market expectations. The decline in inflation was largely due to energy prices falling.

Accordingly, the trend pointed down mildly, with annual average inflation coming in at 4.8% in June (May: 5.0%). Meanwhile, core inflation fell to 3.5% in June from May’s 3.9%.

Finally, consumer prices fell 0.01% in June over the previous month, swinging from the 0.30% increase logged in May. June’s result marked the weakest reading since November 2022.

Inflation should ease further from current levels this year, for two main reasons. First, the base effect is set to toughen; inflation surged to more than two-decade highs in H2 2022 as a result of surging energy prices. Second, consumers will likely reign in their spending ahead as a result of depleted savings and rising interest rates amid high debt. An upside risk is posed by sticky core inflation, which remained above headline inflation in June.

Analysts at Nomura said:

“Reflecting a likely rise in public transportation fares, we revise up our 2023 and 2024 inflation forecasts to 2.9% yoy and 1.7% (BOK: 3.5% and 2.4% in 2023 and 2024), respectively, from our previous forecasts of 2.7% and 1.4%.”

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