Consumer prices rose 2.3 percent in April, mostly due to a spike in agricultural produce prices triggered by the H5N8 bird flu epidemic, as well as a jump in industrial product prices, sparked by rising oil prices, data showed Tuesday.
The rapid year-on-year increase in consumer prices, especially for food products and daily necessities closely related to household spending, is fanning concerns over inflation. These rising living costs translate into reduced disposable income for many low-income earners struggling to cope with the fallout of the COVID-19 pandemic.
The government acknowledges that consumer price growth is expected to surpass 2 percent in the near term. But it maintains that the figure will inch down in the latter half of this year, driven by a variety of efforts to keep the prices of key goods under control.
Statistics Korea data showed the consumer price index in April at 107.39, up 2.3 percent from a year earlier and up 0.2 percent from a month earlier.
The year-on-year figure is the highest since August 2017, when it stood at 2.5 percent.
"A rise in both supply and demand have affected the prices' growth, chiefly led by rising oil prices and a recovery in economic sentiment. It is likely that upward pressure will continue for a while."
Crude prices rose 13.4 percent year-on-year, pushing up industrial product prices by 2.3 percent year-on-year. Agricultural, livestock and fisheries product prices increased 13.1 percent year-on-year.
There are clear signs of concern about inflation, but consumer price growth here is driven by supply shocks rather than demand shocks. The latter are usually associated with an economic recovery following a lengthened period of slowdown, according to Seoul National University economist Kim So-young.
"Concerns over inflation are driven by a surge in food prices. Inflation means that household spending power can be significantly hampered, leading to tightened private consumption. Inflation in other economies usually is a result of economic recovery, with the U.S. and China being cases in point," he said.
The government said that the impact of inflation will be limited, as necessary price-stabilizing measures will be put in place.
"Consumer prices in the second quarter are likely to rise above 2 percent," First Vice Minister of Economy and Finance Lee Eog-weon said, during a meeting held to review macroeconomic market conditions at the Korea Federation of Banks in Seoul. "The government will do its best to manage stable prices so that inflation does not have a wider impact in the second quarter."