Gap widens between perceived inflation and official figure

By Yi Whan-woo

Prices of agricultural, livestock and fishery products are surging, widening the gap between consumer price increases and the actual level of headline inflation that has cooled down to the 2 percent range.

This gap has widened particularly in the wake of weeks of heavy rains that wreaked havoc on the country, prompting concerns that consumer prices may rise again temporarily in the third quarter.

Headline inflation, the overall measure of the change in the value of all goods and services within an economy, softened to a 21-month-low of 2.7 percent in June from a year earlier.

During the cited period, however, the prices of many fresh foods sensitive to weather conditions increased sharply.

For instance, the wholesale price of lettuce surged 343.8 percent, while that of spinach and green pumpkin jumped 214.1 percent and 147.4 percent, respectively.

“All of these vegetables are among sought-after grocery items and they take up a significant portion of ordinary households' monthly expenses,” an industry source said.

The source added that vegetables as a whole are being valued with 1.69 percent headline inflation, but rising by 2.5 percent in terms of the monthly expenses of ordinary households.

“Taking such difference into account, it can be said that consumers perceive overall inflation as still high even though it is slowing down,” it added.

Speaking on condition of anonymity, an LG Economic Research Institute economist speculated that external risk can add to upward pressure on the prices of grocery items

The economist pointed out that Russia's blockade of Ukrainian grain exports and soaring international crop prices are a part of the picture.

He also pointed out that oil and other energy prices remain volatile and the cost of food production in Korea could continue rising.

Joo Won, deputy director of the Hyundai Research Institute, speculated that hikes in fresh food prices may prompt headline inflation to bounce back up in the third quarter despite its downward course for the entirety of 2022.

Under the circumstances, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho put aside concerns over the resurgence of inflation, saying, “There will be hardly any change in the (downward) course of consumer price.”

Still, he said the government will closely pay attention to the supply of fresh foods and ensure supply remains stable.