Bloomberg News

S.Korea Inflation Moderated to Slowest Pace in 32 Months

July 01, 2012

South Korea’s inflation moderated in June on falling oil prices and the government expanding free school lunch and child care programs, giving the central bank more leeway to forgo raising borrowing costs.

Consumer prices increased 2.2 percent from a year earlier after a 2.5 percent gain in May, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 12 economists was for a 2.5 percent gain. Prices fell 0.1 percent from May.

The Finance Ministry on June 28 lowered its forecasts for inflation and economic growth for this year, citing the European debt crisis as a “long-term threat.” The Bank of Korea, which targets inflation at between 2 percent and 4 percent, will determine borrowing costs on July 12.

“Inflation is going to decelerate for months to come,” said Lim Ji Won, an economist at JPMorgan Chase & Co. in Seoul. “Prices of manufactured goods have been falling with oil prices so this is being reflected in June.”

The won rose for a fifth day, reaching its highest level in almost eight weeks, gaining 0.2 percent to 1,142.91 per dollar as of 9:22 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,139.50 earlier, the strongest since May 9. The Kospi stock index rose 0.1 percent.

Core consumer prices, which exclude oil and agricultural products, advanced 1.5 percent in June from a year earlier.

Slower Growth

Gross domestic product may expand 3.3 percent this year, less than a December estimate of 3.7 percent, the Finance Ministry said June 28. Inflation this year may be 2.8 percent rather than a past 3.2 percent prediction, it said.

South Korea’s exports rose in June, snapping three months of declines, after a weaker won fueled overseas sales, according to a separate report yesterday. Overseas shipments rose 1.3 percent from a year earlier, the Ministry of Knowledge Economy said, after a revised 0.6 percent decline in May.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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