A "heatflation" phenomenon—a portmanteau of heat and inflation—is emerging as prices, led by farm produce, climb amid record heat waves with highs topping 40 degrees. Already in July alone, cucumber and spinach prices nearly doubled. Research shows that when the temperature rises 1 degree, agricultural prices increase by 0.4 to 0.5 percentage points and overall consumer prices rise by 0.07 percentage points.
◇ Price of 10 cucumbers, from 7,358 won to 13,824 won
On the 6th, according to the Korea Agro-Fisheries & Food Trade Corporation (aT), the retail price for 10 cucumbers (average of retailers and traditional markets) was 13,824 won, up 87.8% from late June (7,358 won). During the same period, the price of 100 g of spinach also rose 95.4% to 1,796 won. Young radish at 1 kg climbed 67.6% to 3,947 won. Perilla leaves at 50 g and a head of napa cabbage also jumped 10.6% and 8.6%, respectively.
The rise in vegetable prices is analyzed as an effect of the record heat wave. When production of fresh foods drops due to extreme heat, prices rise sharply. The average temperature in July this year was 26.8 degrees, the third highest since nationwide meteorological observations began in 1973.
This "heatflation" also occurred last year. In July last year, the agricultural, livestock and fishery product index rose 1.5% from the previous month and 2.1% from a year earlier. In August last year, when the heat wave peaked, the growth rate expanded to 4.8% both month over month and year over year.
◇ Bank of Korea says climate change raises inflation in the medium to long term
The Bank of Korea released research two years ago analyzing the impact of "heatflation." It found that a temporary 1-degree rise in temperature lifts the agricultural price inflation rate by 0.4 to 0.5 percentage points and the overall consumer price inflation rate by 0.07 percentage points. The BOK's research includes the finding that "climate change not only exerts short-term upward pressure on prices but also raises inflationary pressures in the medium to long term."
Concerns are emerging that if the heat wave continues this year, it could feed into higher consumer prices. July consumer price inflation was tallied at 2.8%. Since the Middle East war began in late February, inflation had climbed successively—▲ 2.2% in March ▲ 2.6% in April ▲ 3.1% in May ▲ 3.2% in June—before easing for the first time in July.
A Bank of Korea official said, "Heat waves also affect prices, but the rainy season or flooding can inflict greater damage on crops," adding, "These factors can raise prices or inflation expectations."