Although the consumer price index in May fell to 1%, prices for personal services such as dining out, insurance fees, and maintenance costs are still maintaining a high level. Despite the international oil price downturn and the stabilization of vegetable prices, the burden felt by consumers on expenditures is not markedly decreasing.
According to the 'May 2024 Consumer Price Trend' released by Statistics Korea on the 4th, the consumer price index last month was 116.27 (2020=100), up 1.9% from the same month last year. This marks the first time the rate has dipped into the 1% range in five months since December.
The main factors pulling down prices were oil and agricultural products. Due to the decline in international oil prices, petroleum products decreased by 2.3% compared to a year ago. Both gasoline (-3.5%) and diesel (-5.5%) showed a downward trend. Additionally, as weather conditions improved, vegetable prices stabilized, resulting in an overall rise of only 0.1% in agricultural, livestock, and fisheries prices. The fresh food index fell by 5.0% from the same month last year, contributing to the overall stabilization of food prices.
However, personal services, which are directly tied to consumer-perceived prices, continued to rise. In May, personal service prices rose by 3.2% compared to the same month last year. Among these, dining out rose by 3.2%, and other personal services increased by 3.1%. Notably, insurance service fees (16.3%), sashimi (5.6%), apartment maintenance fees (4.8%), and chicken (4.7%) saw significant price hikes.
In particular, the rise in 'food prices' centered around dining out further pressured consumers' wallets in May, known as 'Family Month.' A Statistics Korea official noted, 'The price increase centered on dining out and personal services is keeping the perceived consumer price level high.' In fact, dining out and other personal services contributed 0.46 percentage points (p) and 0.62 percentage points, respectively, out of the overall 1.9% rise in prices.
Among industrial products, processed food rose by 4.1%, boosting the overall price level by 0.35 percentage points. This matches the increase rate of April and is the highest since December 2023 (4.2%). By item, significant surges were seen in products like dried squid (50.5%), chocolate (22.1%), and seasoning sauces (17.1%). Under the housing cost category, rents increased by 0.8%, and public services rose by 1.3%.
Livestock prices, in particular, rose 6.2% compared to the same month last year, marking the highest increase in 35 months since June 2022 (9.5%). Prices for pork (8.4%), domestic beef (5.3%), imported beef (5.4%), and eggs (3.8%) all increased. I Doo-won, director of economic trend statistics at Statistics Korea, analyzed, 'Pork import prices have increased, slaughter numbers for beef have decreased, and even the price of chicken as a substitute has risen.' The price of eggs rose in April for the first time in eight months, and it continued upward last month.
Regarding whether the execution of the 1st supplementary budget of 13.8 trillion won impacted prices, the government stated, 'At present, we do not see significant effects.'
The Bank of Korea forecasted that the consumer price increase rate will show levels in the high 1% range in the second half of this year. Kim Woong, deputy governor of the Bank of Korea, noted, 'The impact of oil price declines and lower demand pressures will grow,' adding that there is a possibility of a slight increase in the inflation rate in June due to base effects from declines in agricultural and petroleum prices.
The government stated that it is continuously preparing supportive measures from a taxation and financial perspective to curb price increases. Im Hye-young, director of price policy at the Ministry of Economy and Finance, said, 'To alleviate industry cost burdens, measures such as applying quota tariffs on food materials and supplies and exempting import value-added taxes are being implemented.'
He added, 'In collaboration with the Ministry of Agriculture, Food and Rural Affairs, we are working with food companies to minimize the items and extent of price increases despite cost rise factors, and to induce discount events to reduce consumer burdens.' He noted, 'Given the significant price uncertainties due to abnormal weather and geopolitical factors, we plan to closely monitor supply and distribution conditions for key consumer goods such as agricultural and marine products and respond promptly if necessary.'