Mild inflation rise does not reflect cost of living

The inflation rate for July stayed within the central bank’s target again but the pressure on household budget is being understated by the official measures of inflation, experts said Monday.

The cost of living had risen by 2.6 percent from a year earlier, remaining under the three percent mark for sixth consecutive month, the Statistics Korea said. 

Economists, however, said most people would feel as if the real cost of living was increasing at higher rates with sharp price increase of agricultural and oil products. 

“There is a disconnect between high frequency items and the overall measure of inflation. Fresh foods and oil are what people regard as driving their cost of living, and these are excluded in the core price figure,” Sun Yoo, an economist at the Woori Investment & Securities told The Korea Herald. 

Fresh food prices are up 16.1 percent in July from a year earlier, the highest rise in nearly six years since it grew by 22.9 percent in 2004 August. Price for vegetables is up 24 percent due to heavy rain-damages in the wet season. Prices of radish and cabbage are up 107.1 percent and 61.5 percent each, although some including rice and eggs have dropped in price. 

Core price rose 1.7 percent from a year earlier, while prices for oil products climbed 8.4 percent.

“The on-year figure of 2.6 percent shouldn’t be the focus because of the base-effect. Price volatilities were also large last year so it would be more correct to monitor prices using the 0.3 percent monthly inflation rate rise,” Yoo said.