There is an urgent need for economic policymakers to pay more attention to irregular growth in consumer product prices. Over the past year, prices of daily necessities have grown despite drops in raw material prices, according to a consumer advocate group.
The Korea National Council of Consumer Organization has compared the consumer prices and rollout costs of 34 processed foods and daily necessities sold by 300 distributors in Seoul.
The organization said raw material prices fell 3.2 percent on average in 2015 from a year earlier, on the back of a slide in prices of international crude oil and grain. On the contrary, the consumer prices of the 34 items rose 0.8 percent over the corresponding period, it revealed.
Among the goods were ice cream, milk, soda pop, snacks, mayonnaise, soy sauce, soybean paste, bean curd, seasoned laver and precooked rice.
Hearing the news, some online commenters have expressed anger, with some saying they did not expect anything from economic policymakers including market regulators. They lamented the situation in which conglomerates and distributors appear to be making a mockery of consumers.
Local consumers used to be duped by shady labeling by cartels of producers or distributors. If the Finance Ministry sits idly by in this situation, the Fair Trade Commission should turn up the heat on any potential price fixing.
Though raw material prices had been in a global slump between 2014 and 2015, prices are steadily rebounding in line with the price of crude oil’s strong recovery since February. Under the reversed situation, consumer prices could increase more quickly in the coming months than in the past year. Initial signs of this have been seen at gas stations, which are starting to hike gasoline and diesel prices.
At the same time, it is important for ministries and monetary policymakers to take the situation more seriously in terms of managing consumer sentiment, which is recovering gradually after touching the bottom last summer. Otherwise, the nation could not see a robust recovery from the shocks stemming from the outbreak of Middle East respiratory syndrome.
Ordinary households, needless to say, have weak capacity to consume amid record-high debt. The lowest earners have been saddled with a high interest payment burden on their borrowings from secondary financial firms, and the middle income bracket is heavily indebted to first-tier banks through mortgage loans.
Any rapid increase in consumer prices would mean a longer-than-expected slump in domestic demand. And this means low growth in gross domestic product.
Policymakers should think about the gap in perceptions, in which local consumers are confused by the disconnect between the inflation figures reported by the Bank of Korea and the real growth in prices they find at retail stores nationwide.
