Products, such as red pepper paste and soybean paste, are displayed at a large discount chain in Seoul last Tuesday. (Yonhap)
SEJONG -- Consumer prices for groceries and transportation in Korea climbed at the fastest rate in a decade in 2021, adding a heavier financial burden on households amid the pandemic, state data showed Monday.
These two items were found to have led the instability in overall consumer prices last year, despite the Bank of Korea’s two interest rate hikes, in August and November.
According to Statistics Korea, consumer prices of groceries rose 5.9 percent in 2021 compared to the previous year -- 6.2 percent for food and 1.8 percent for beverages. This marked the highest growth in 10 years, since 2011.
A 11.4 percent surge was seen in the prices of milk, cheese and eggs, alongside 10.7 percent in fruit, 8.4 percent in meat, 7.2 percent in edible oils and fats, 6.3 percent in bread and cereals and 4.2 percent in vegetables and seaweed.
The growth in prices of groceries was 2.3 percent in 2016, 3.4 percent in 2017, 2.8 percent in 2018 and zero percent in 2019. It rebounded to 4.4 percent in 2020, and further shot up to 5.9 percent in 2021.
Transportation prices climbed 6.3 percent on-year, which comprises fuel for automobiles and fares for buses, trains and flights, with the figure also recording the highest in a decade. Of these, in particular, fuel for automobiles posted a noteworthy growth of 11.1 percent.
This was attributed to a spike in international crude prices, which fanned the surge of 14.8 percent in gasoline prices in the local market, along with 16.4 percent in diesel prices and 18 percent in liquefied petroleum gas prices.
“As groceries and fuel for cars are classified as daily necessities, it is estimated that a large portion of households suffered heavy cost burden from the price growth,” a Seoul-based researcher said.
Statistics Korea data also showed that prices of food service at restaurants recorded 2.8 percent growth, though the growth in lodging service was just 0.5 percent.
In contrast, relatively low price growth was reported in education services at 0.9 percent, clothes and shoes at 0.6 percent, entertainment and culture at 0.4 percent and alcoholic drinks at 0.4 percent. Social distancing from COVID-19 is estimated to have caused people to spend less on these items as they reduced going out and leisure activities.
Though the government has carried out a variety of actions to curb consumer prices, there are few predictions that the growth will stop in the near future.
Researchers say that both recovery in domestic demand and external factors -- such as logistics problems in the global supply and surges in energy prices -- are still fanning inflation.
A report from the BOK forecasted that a longer-than-expected glitch in global supply will have further effects on the local market, which will build inflationary pressure in wider segments.
Some market observers cast worries over the supplementary budget worth 14 trillion won ($11.7 billion), which will be proposed to the National Assembly this week, in terms of negatively affecting households’ cost burden.
Deputy Prime Minister and Finance Minister Hong Nam-ki predicted that the negative impact would be limited as long as the volume of the extra budget -- to be fostered for microbusiness owners -- is not expanded.
Some ruling party lawmakers are calling for the Finance Ministry to increase the scale of the budget from 14 trillion won to as much as 35 trillion won.
By Kim Yon-se (firstname.lastname@example.org)