South Korea inflation tops 3% on Middle East oil shock

South Korea’s consumer price index reached 119.92 in May, marking a 3.1% annual increase—the first time inflation exceeded 3% since March 2024. The National Data Agency attributed the rise to soaring petroleum prices, which climbed 24.2% year-on-year, the steepest increase since July 2022. Gasoline prices rose 23.1%, diesel surged 33.3%, and kerosene increased 21.7%, directly impacting household costs. Industrial products led the inflation spike with a 4.2% annual rise, while service prices increased 2.8%. International airfares jumped 33.5% due to fuel surcharges, and overseas travel packages rose 26.3%. The living price index, tracking essential household items, climbed 3.3%, worsening financial strain on consumers. Lee Doo-won, a National Data Agency official, linked the petroleum price surge to global oil market volatility caused by the Middle East conflict. The government noted its price cap and fuel tax cut reduced May’s inflation by 0.6 percentage points but warned further measures were needed to stabilize household expenses. Economists predict inflation will persist, citing ongoing geopolitical tensions and supply chain disruptions. Jeong Se-eun, a professor at Chungnam National University, warned that even if the war ends, oil prices may remain elevated due to damaged infrastructure in the region. Park Jin, from the Korea Development Institute, advised preemptive steps like potential interest rate hikes to curb inflationary pressures. The Finance Ministry emphasized efforts to mitigate price uncertainty, including a task force on livelihood prices. Experts agree that without significant supply improvements or demand adjustments, inflation is likely to stay near 3% for the remainder of 2024.