In July, the consumer price inflation rate eased compared to the previous month, but the burden of consumer prices remains significant. Prices for processed foods and dining out, including bread, coffee, and kimchi, have risen more than other items, leading to higher food costs.
According to the 'July Consumer Price Trends' announced by the Statistics Korea on the 5th, the inflation rate for consumer prices last month increased by 2.1% compared to the same month last year. The inflation rate decreased by 0.1 percentage point (p) from June. The analysis suggests that the decline in oil prices (-1.0%) contributed to the reduction in the rate of increase. However, prices for processed foods and dining out rose by 4.1% and 3.2%, respectively, maintaining a high level.
◇ Processed foods driving overall prices up… the culprit is bread
Last month, the price of processed foods rose by 4.1% compared to the same month last year. The item with the greatest contribution to the increase in processed food prices was bread. Last month, the price of bread was reported to have increased by 6.4%. Even in January and February this year, the price increase rate for bread was only around 3-4%, but since March until last month, the price increase has consistently remained between 6.3% and 6.4% for five consecutive months.
Among other items, prices for coffee (15.9%), ham and bacon (7.1%), kimchi (12.5%), and ramen (6.5%) rose significantly.
Last month, the dining out price increased by 3.2% compared to the same month last year. The price of sushi dining rose by 6.3%, while pork ribs increased by 2.3% and beef by 1.6%. Compared to the increase rates in June, the dining out price for pork ribs last month rose by 0.5 percentage points (p), and the price for beef dining increased by 0.4 p.
Some speculate that the increase in dining out prices may be attributed to an increase in demand due to the payment of people's livelihood recovery consumption coupons. In fact, some dining establishments have raised prices in line with the plans for distributing the people's livelihood recovery consumption coupons.
The statistical authorities explained that it is difficult to statistically analyze the effect of consumption coupons. Park Byeong-seon, head of the price trends department at Statistics Korea, noted, "The people's livelihood recovery consumption coupons began to be actively used from the 21st of last month," adding, "While the expectation that demand will increase with the distribution of consumption coupons may influence prices, it is challenging to distinguish the exact effect."
Lim Hye-young, the head of price policy at the Ministry of Economy and Finance, stated, "In a situation where there is no noticeable recovery in domestic demand, the impact of the supplementary budget (on inflation this year) will be limited," adding, "The Bank of Korea also forecasts that the inflation impact of the supplementary budget will be 0.1 percentage points next year."
◇ Hitflation hitting the shopping basket
Price increases for fresh vegetables due to the heat wave have also been detected. According to the relevant ministries, last month the number of days with a heat wave (14.5 days) was 10.2 days longer than in July last year (4.3 days). This weather change has led to rising vegetable prices. The price of spinach rose by 13.6% compared to last year, and young radishes increased by 10.1%.
The upward trend in vegetable prices was also clearly evident when compared to the previous month. The price of spinach soared by 78.4% in a month, while young radishes (57.1%), lettuce (30.0%), napa cabbage (25.0%), and green onions (14.4%) also saw significant price increases.
Prices for seafood also saw a large increase. It has recorded a rise of 7.6% compared to the same month last year. This is the largest increase since February 2023 (8.1%) for the past 2 years and 5 months. Among items, the price of mackerel rose by 12.6%, squid by 6.5%, and hairtail by 6.2%. The analysis suggests that the increase in seawater temperatures has led to a decrease in catch volume, resulting in price increases.
During a meeting of the price-related vice ministers held that day, Lee Hyung-il, the first vice minister of the Ministry of Economy and Finance, requested, "Please ensure thorough management by item to minimize price and supply volatility in agricultural and livestock products caused by adverse weather conditions." The related ministries, including the Ministry of Agriculture, Food and Rural Affairs and the Ministry of Oceans and Fisheries, decided to focus on lowering food prices this summer.
The government has decided to increase the scale of cabbage supply to 200-300 tons, double that of the previous month. For items significantly affected by the heat wave and heavy rain, such as watermelons, discounts will continue. Recently, rice, which has seen a significant price increase, will be promoted with separate discounts of 3,000 won per 20 kg.
The government has announced that it will supply 30% more Hanwoo cattle than usual this month. For chicken, it plans to increase the domestic supply volume. Up to the end of last month, 4,000 tons of Thai chicken were imported. Brazilian chicken is expected to enter the country from the middle of this month.