Consumer price growth at 14-month high in March amid economic recovery

South Korea's consumer prices grew at the fastest pace in 14 months in March on higher prices of farm and oil products, data showed Friday, in the latest sign that inflationary pressure is building up amid an accelerating economic recovery.

The consumer price index rose 1.5 percent on-year in March, accelerating from a 1.1 percent on-year gain in the previous month, according to the data compiled by Statistics Korea. The index grew 0.1 percent on-month.

It marked the fastest on-year rise since January last year, when the price index advanced 1.5 percent.

Core inflation, which excludes volatile food and oil prices, rose 0.6 percent on-year last month.

The country's inflation remained subdued last year due to the fallout of the COVID-19 pandemic.

But consumer prices are under upward pressure as the Korean economy is on a recovery track, and food and oil prices have recently advanced.

Asia's fourth-largest economy is recovering on the back of robust exports. The country's overseas shipments grew 16.6 percent on-year in March and industrial output rose at the fastest clip in eight months in February.

Policymakers said inflation is expected to temporarily pick up in the second quarter, affected by gains in prices of farm and oil products.

Last month, prices of agricultural, livestock and fisheries products advanced 13.7 percent on-year due to a supply shortage and the outbreak of bird flu. Prices of farm products jumped 19.2 percent.

Prices of petroleum products rose 1.3 percent on-year as oil prices picked up. Those of industrial goods gained 0.7 percent, the first on-year growth in one year.

Prices of Dubai crude, South Korea's benchmark, reached an average of $64.4 per barrel in March, higher than $33.7 the previous year, according to the finance ministry.

A rise in housing prices showed no letup despite the government's efforts to stabilize home prices. Housing prices rose 1 percent on-year in March, marking the 11th straight month of on-year gains.

"As the economy recovers, inflationary pressures are gradually growing, and inflation expectations also remain high. But consumer prices are not likely to sharply gain as upward pressure is balanced against downward pressure," Eo Woon-sun, a senior Statistics Korea official, told reporters.

A central bank report showed South Korean consumers forecast in March that inflation would grow 2.1 percent over the next 12 months, up from an estimate of 2 percent in the previous month.

The finance ministry said the April consumer inflation is expected to be affected by the supply of agricultural and livestock products, oil price trends and the development of the pandemic.

Still, the Bank of Korea (BOK) is widely expected to maintain its accommodative monetary stance to help prop up the economic recovery.

The BOK froze its policy rate at a record low of 0.5 percent in February amid lingering economic uncertainty. The bank aims to keep inflation at 2 percent over the medium term.

The BOK revised up its 2021 inflation outlook to 1.3 percent from its earlier estimate of 1 percent. (Yonhap)