Bloomberg News

South Korea’s Inflation Slows Even as Economy Gaining Momentum

December 30, 2012

South Korea’s Inflation Slows Even as Economy Gaining Momentum

Customers shop for shoes in a store in Seoul, South Korea. Photographer: Jean Chung/Bloomberg

South Korea’s inflation eased to the slowest pace in four months in December, staying below the nation’s price target even as an economic recovery shows signs of gaining momentum.

Consumer prices increased 1.4 percent from a year earlier after a 1.6 percent gain in November, Statistics Korea said in an e-mailed statement today. The median estimate in a Bloomberg News survey of 13 economists was for a 1.5 percent gain. Prices rose 0.2 percent from the previous month.

South Korea’s industrial output exceeded estimates in November and the current-account surplus rose to a record, further evidence that a slowdown may have hit bottom last quarter. Pressures on consumer prices “are not expected to be large” as Asia’s fourth-largest economy recovers slowly, the Bank of Korea said in a statement on Dec. 27.

“Inflationary pressures remain contained for the time being,” Ronald Man, a Hong Kong-based analyst at HSBC Holdings Plc, said before the release. “Given the level of overall demand remains weak, policy makers will likely maintain an easing bias on both the monetary and fiscal fronts.”

The Bank of Korea cut interest rates twice this year to support growth and will next decide borrowing costs on Jan. 11. The central bank is adopting a narrower target range for inflation for the next three years, of between 2.5 percent and 3.5 percent, from the current 2 percent to 4 percent band.

Core consumer prices, which exclude oil and agricultural products, advanced 1.2 percent in December from a year earlier.

The won completed a sixth weekly gain last week, closing at 1,070.53 per dollar on Dec. 28 in Seoul, while this year’s 7.7 percent advance is the biggest among Asia’s 11 most-traded currencies. The Kospi stock index gained 0.5 percent on Dec. 28.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net; Eunkyung Seo in Seoul at eseo3@bloomberg.net

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


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