South Korea’s headline inflation accelerated for the third straight month, gaining 1.3 percent in December on year to finish 2016 at an annualized growth of 1.0 percent, mostly due to supply-end factors from rebound in oil prices and spike in fresh food prices from unseasonable climate and avian flu.

According to data released by Statistics Korea Friday, the nation’s consumer price index (CPI) rose 1.3 percent last month from a year earlier, slowing from the 1.5 percent gain in November. During the final three months, inflation recovered above 1 percent in tune with recovery in international oil prices after averaging at 0.7 percent for 20 months till August. The annualized inflation rate of 1.0 percent - the third lowest-ever annual rate since CPI data was compiled - remains away from the 2.0 percent target of the central bank. The Bank of Korea on Friday pledged to keep its monetary policy easy and accommodative in 2017 to aid economic recovery as demand-end prices remain subdued.

The jump in the headline index in recent months was largely blamed on spike in vegetable prices from unprecedentedly lengthy hot summer. Egg prices have skyrocketed due to the worst-ever outbreak of bird flu that sabotaged the country’s poultry business.

Prices of agricultural, livestock and fishery products soared 6.7 percent in December from a year-ago, pushing up the headline index by 0.52 percentage point. For the full year, prices of agriculture, fisheries and meat gained 3.8 percent from 2015, contributing to 0.30 percentage point gain in annual inflation. Fresh food price increases were the highest since 2011. Petroleum-related prices rose 1.1 percent in December.

Service prices rose 2.0 percent on year due to runaway rent prices, lifting the headline CPI by 1.13 percentage points. Utility fees plunged 11.5 percent on year.

By Kim Gyu-sik

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