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Korea’s inflation in May in slowest in 4 mo, likely to pressure BOK

Collected: 2016.06.02

Distributed: 2016.06.03

Source: Go Direct

South Korea’s inflation grew at the slowest pace in May since the beginning of the year as utility cost remained subdued despite recent spike in international oil prices amid sluggish domestic demand as underlined by poor industrial and domestic sales data for last month.

According to data released by Statistics Korea Wednesday, the country’s consumer price index (CPI) rose 0.8 percent in May from the same month in the previous year, compared with on-year gains of 1.0 percent in April and March, and 1.3 percent in February. Cut in petroleum product prices brought down the CPI by 0.49 percentage points. The core CPI excluding oil and farm produces gained 1.6 percent in May from a year ago. Service prices rose 2.2 percent.

With the inflation still far off from 2 percent target, the Bank of Korea may be pressured to weigh the possibility of a cut in benchmark interest rate that has been kept at record low of 1.5 percent for a year when it meets for the June monetary policy meeting next Thursday.

Wednesday data added more gloom to the economy with signs of little relief from both home and external front. Exports fell 6.0 percent in May on year in record-long 17-month losing streak. Industrial output shriveled 2.8 percent in May on year, the biggest fall since July 2015 amid the outbreak of the Middle East Respiratory Syndrome.

The central bank also would have to consider taking preemptive action to aid the economy as restructuring in major shipbuilders and shippers are expected to further hurt consumer and corporate sentiment.

By Kim Gyu-sik

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