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Prices of fresh food, including meat, vegetable and fish, posted the biggest rise in 2010 in 16 years, due to hostile weather conditions, leading consumer prices to grow 2.9 percent annually, according to the Statistics Korea Friday.
In December, the consumer price index rose by 0.6 percent in December month-on-month, and by 3.5 percent from a year ago, raising concerns that inflationary pressure is building up fast here.
The rise in inflation may prompt Bank of Korea to raise its key interest rate this month. Although the central bank’s inflation target ranges between 2 and 4 percent, it has wanted to control the rate at below 3 percent.
Food price once again was the main culprit behind the soaring prices. Meat, fish, crops and vegetables on average rose by 1.6 percent in December from a month ago.
The government has boasted that it has managed to maintain the yearly inflation rate below its target of 3 percent, while the growth of gross domestic product (GDP) hit 6.1 percent this year.
But the December inflation data threw a cold shower to the euphoria as it showed food and energy prices can spoil the party next year. The December figure is a more accurate measure of current prices as the annual figure is merely an average between January and December.
The statistics agency defended the government’s position, that the December result alone may give a wrong impression for the purpose of statistics and policy making.
“There can be seasonal factors in measuring the inflation rate, so it may not be wise to take the December figure alone when you want to know the yearly inflation rate,” an official of the consumer price index bureau told The Korea Times.
Despite her explanation, the data showed an alarming sign that the rise in food prices may be beginning to influence other goods and services _ the index for manufactured goods, such as cars and electronics, unexpectedly rose by 1.2 percent in December, and that of oil products rose by 3.4 percent.
The agency blames hostile weather conditions for the surge in the food prices. Cabbage, for example, rose by 80 percent, garlic by 52 percent and radish by 98 percent.
“With the exception of fresh food products triggered by an imbalance in supply and demand, consumer price gains remained relatively stable throughout the year despite strong economic growth,” an official said in a briefing.
Excluding volatile oil and food costs, the country's core inflation prices for 2010 rose 1.8 percent from a year earlier, down from the 3.6 percent gain reported for the whole of last year, the agency said.
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