Raw Material Prices Rise 45% in January
By Yoon Ja-young
Staff Reporter
Raw material prices rose 45.1 percent in January from a year ago, recording the steepest year-on-year increase in 10 years.
According to the Bank of Korea, Thursday, the price index for raw materials and intermediate goods rose 17.3 percent from a year ago in January, recording the biggest jump since October 1998. The index soared 20.6 percent back then on the plunge of the Korean currency following the Asian financial crisis.
The index has been rising at a steeper pace since the latter half of last year, recording a 4.7 percent rise in September, 7.8 percent in October, 12 percent in November and 13.5 percent in December.
Inflation is especially marked for raw materials. The 45.1 percent year-on-year gain is the steepest rise since January 1998 when the country saw 57.6 percent inflation.
The central bank explained that on top of international oil price hikes, a construction boom in China and the Middle East pushed up the prices of ores by over 50 percent. Increasing demand on grains due to the bio fuel boom, on top of a drought, also pushed up the prices of agricultural and fisheries products by 18.9 percent.
Intermediate goods prices rose 10.8 percent from a year ago due to a global raw material prices hike.
The price index for raw materials and intermediate goods functions as an indicator of consumer inflation. ``Rises in oil and other raw material costs pushed up the prices of intermediate goods. Consumer prices will likely continue to rise by over 3 percent,'' the central bank said.
``Inflation is weakening real purchasing power of households. The economy is likely to slow down further on worsening consumption,'' said Park Hyung-jung, an analyst at Woori Investment & Securities.
Global inflation, including oil price hikes, is negatively affecting consumer sentiment around the world. ``If the high oil prices continue in the near future, the U.S. economy is likely to enter a recession,'' Park said.
As a major consumer, a recession in the United States could add a burden other economies, including Korea which relies heavily on exports.