Consumers are expected to face a spike in the cost of daily necessities after the Chuseok holiday amid soaring international crude oil and other raw material prices, according to industry officials, Monday.
Milk prices, in particular, have already risen 8.8 percent; while major cities plan to raise public transportation fares in the coming days due to escalating labor and fuel costs. Additionally, households and businesses could see a surge in utility bills in the fourth quarter as the government may allow the Korea Electric Power Corp. (KEPCO) to raise electricity prices.
On Monday, the Korea Dairy Committee raised the price of milk to 88 won ($0.06) per liter, or 8.8 percent, to 1,084 won. Following this, major dairy companies including Seoul Milk, Maeil Dairies and Namyang Dairy Products hiked their prices for milk and milk-related products by 3 to 13 percent.
The dairy sector contends that such increases are unavoidable, attributing them to the rising costs of raw materials such as crude oil and sugar. This is compounded by surges in expenses for packaging, processing, and logistics. As milk prices climb, products that predominantly use milk as an ingredient, such as bread, instant coffee, and ice cream, are anticipated to experience subsequent price hikes.
Using public transportation is set to become pricier too. On Saturday, Seoul's basic subway fare will jump from 1,250 to 1,400 won. Busan's bus fare will see an increase of 350 won beginning Friday. Incheon is also adjusting both its subway and bus fares upwards by 150 won and 250 won, respectively, from Saturday.
Other local administrations that haven't yet announced increases in transportation fares will likely need to consider hikes, given the sustained rise in global oil prices.
Furthermore, the government is currently deliberating an increase in electricity prices for the fourth quarter of this year. From the second quarter of last year through this year, KEPCO has consistently upped its electricity prices every quarter.
The move aims to offset losses and bring electricity tariffs back to normal, which had been kept stagnant until last year despite rising global energy prices.
"Although the inflation rate in Korea showed a downward trend after peaking at 6.3 percent last July, it's now signaling a rebound," said Hwang In-wook, an economist at the National Assembly Research Service.
He cited frequent atypical weather events, geopolitical uncertainties, and cutbacks by oil-producing nations as potential risks contributing to future inflation.
"As major countries display varying directions in economic indicators and divergent policy responses, there's a mixed picture of upward and downward pressures on prices. With the recent instability in oil and raw material prices, including agricultural products, it has become even more challenging to find a consensus on inflation forecasts," Hwang continued.
"It's a pivotal time to ensure that efforts to stabilize price align seamlessly with other economic indicators, including the business cycle, financial conditions, and fiscal policies."