Korean CPI up 5.2% on rising electricity and gas bills

Korean CPI up 5.2% on rising electricity and gas bills [Photos by Park Hyung-ki and Lee Seung-hwan]

Prices rose more than 5 percent, the biggest month-on-month increase in three months, in January as electricity, gas and water prices soared due to public utility rate hikes despite slowing oil price increases.

According to the consumer price trends for January 2023 released by Statistics Korea on Thursday, the consumer price index (CPI) last month was 110.11, up 5.2 percent from the same month last year. This is 0.2 percentage point higher than the previous month‘s increase of 5.0 percent.

Inflation rose on month for the first time in three months since October last year, when prices were up 5.7 percent, higher than 5.6 percent in September.

“High inflation in January was largely due to the electricity price hike,” said Kim Bo-gyeong, deputy director general for economic trend statistics at Statistics Korea. “As a result, electricity, water and gas bills accounted for 0.17 percentage point more in the overall price increase compared with the previous month.”

The soaring inflation rate has slowed gradually after recording 5.4 percent in May last year, 6.0 percent in June and 6.3 percent in July, but high inflation exceeding 5 percent has persisted for the ninth month.

The month-on-month inflation rate was also the highest at 0.8 percent in January since September 2018.

The increase is largely attributed to public utility price hikes. Electricity, gas and water bills surged 28.3 percent last month from a year earlier, again exceeding the highest level since 2010 when statistics data were introduced.

In fact, electricity prices were raised again in the first month this year following increases in April, July and October last year. The Ministry of Trade, Industry and Energy earlier announced a plan to raise electricity rates in the first quarter of this year by 13.1 won ($0.01) per kilowatt hour, a steep increase given that electricity prices rose by 19.3 won last year.

As a result, electricity bills in January jumped 9.2 percent from the previous month and 29.5 percent from the same month last year.

Gas bills soared 36.2 percent from a year ago and heating costs also rose 34.0 percent.

Electricity, gas and water bills have increasingly accounted for a higher share of the entire inflation rate at 0.49 percentage point in July last year, 0.77 percentage point in October and 0.94 percentage point last month.

[Photo by Lee Chung-woo]

Industrial products rose 6.0 percent. Oil product prices rose 5.0 percent, lower than 6.8 percent in the previous month, due to the recent drop in oil prices. Diesel and kerosene price increases remained high at 15.6 percent and 37.7 percent, respectively, while gasoline prices fell 4.3 percent.

Processed foods were up 10.3 percent, same as the previous month, which is the highest since April 2009. Main drivers of growth were bread, snacks and coffee.

Livestock and fisheries rose 1.1 percent on cooling demand. Agricultural products fell 0.2 percent, continuing the decline in the previous month that saw a 1.6 percent drop, but vegetable prices rose 5.5 percent.

Price increases of personal services continued to slow to 5.9 percent from 6.0 percent in the previous month due to a slight decline in food prices to 7.7 percent from the previous 8 percent level. Other personal services were up 4.5 percent, mainly led by apartment management and insurance service fees.

The core inflation index, excluding agricultural product and oil prices, rose 5.0 percent, higher than 4.8 percent in the previous month. This is the highest since February.

Another core inflation indicator that excludes food and energy prices rose 4.1 percent.

CPI for living necessaries were up 6.1 percent.