This year's annual consumer price inflation rate concluded at the low 2% range, reflecting a reach towards the usual price stability target of 2%. However, individual items showed a different scenario. In particular, the price of 'fruits' surged to its highest in 20 years since 2004.
According to the '2024 Annual Consumer Price Trends' released by Statistics Korea on the 31st, this year's inflation rate was recorded at 2.3%. After the so-called 'high inflation period,' marked by rates of 5.1% in 2022 and 3.6% in 2023, the inflation rate has come close to the stability target of 2%.
Overall, prices have shown stability, but 'agricultural products,' especially 'fruits,' experienced a historic surge this year.
This year's agricultural price inflation rate reached 10.4%, the highest in 14 years since 2010 (13.5%). Fresh fruits like fruit and berries soared by 17.1% this year, marking the largest increase in 20 years since 2004 (24.3%). In both 2004 and 2010, climate deterioration led to poor growth and shipping of vegetables.
This year as well, abnormal climate conditions spurred the 'solo surge' in agricultural prices. Hwang Kyung-im, Director of the Ministry of Strategy and Finance's price policy department, noted, "The poor yield of apples and pears, which are grown on an annual basis, affected fruit prices this year," adding, "After the summer, prolonged heavy rain, heatwaves, and high temperatures sustained the price strength of vegetables like cabbage."
Looking at individual items, prices soared for apples (30.2%), pears (71.9%), tangerines (46.2%), tomatoes (21%), and cabbage (25%). In contrast, prices fell for domestic beef (-1.5%), chicken (-5.8%), and mackerel (-2.9%).
Due to this, the contribution of food-related expenditure to the inflation rate was relatively high. Among the overall 2.33% inflation rate (noted to the second decimal place), food and non-alcoholic beverages contributed 0.56 percentage points, and food and lodging contributed 0.46 percentage points.
The issue of agricultural prices destabilized by climate problems became a concern for the currency policy authorities, including the Bank of Korea, this year. Price levels are a major consideration in executing currency policy measures like adjusting the base interest rate. Earlier, Lee Chang-yong, governor of the Bank of Korea, expressed such concerns in April, stating, "When climate change is severe, should we use policies like the current ones (currency policy and fiscal subsidies) to protect producers, or fundamentally solve the issue through imports?", unusually commenting on agricultural policy.
Price authorities foresee upward pressure on food-related prices, including agricultural products, to continue until early next year. Director Hwang noted, "There will be upward price pressure due to demand for traditional holiday goods in early January next year," adding, "Moreover, the base effect from low petrochemical prices this year is also considered an upward factor."
While inflationary pressure is expected to briefly intensify early next year, the government anticipates a slowdown in the annual inflation rate compared to this year (2.3%). This forecast considers factors like the slowing rise in international oil prices and the stabilization of core inflation. The Ministry of Strategy and Finance announced, "To alleviate the burden of fuel and heating costs during the winter, we extended the fuel tax cut measures to the end of February next year and will continue policy efforts such as support for discounts on agricultural and livestock products, energy and agricultural food vouchers, and allocation tariff support for major food raw materials."