Korea: Inflation picks up slightly in December
December 31, 2019
Consumer prices increased 0.2% over the prior month in December, contrasting November’s 0.6% decrease. Higher prices for food and non-alcoholic beverages, and household equipment and maintenance were chiefly behind December’s rise.
Inflation increase to 0.7% in December, following November’s 0.2% rise, but remained well below the Bank of Korea’s 2.0% target rate. Core inflation—which excludes fresh food and energy prices—edged up to 0.6% in December from 0.5% in November. Annual average inflation was stable at 0.4% in December from the month prior.
Going forward, inflationary pressures are projected to perk up this year as lower interest rates—particularly ultra-low mortgage rates—support household spending and credit demand. Meanwhile, strong government spending should also support wage growth and job creation, further fueling inflation. That being said, relatively tepid economic growth, elevated household debt and a subdued housing market will likely keep inflationary pressures comfortably below the Bank of Korea’s 2.0% target rate.
Author: Steven Burke, Economist