September 1, 2017 / 12:26 AM / a year ago

South Korea inflation hits five-year high in August as fresh food prices soar

SEOUL (Reuters) - South Korea’s annual inflation surged in August to its highest in more than five years as heavy rain and a summer heatwave pushed up the price of fresh foods, government data showed on Friday.

A fish dealer waits for customers at a fishery market in central Seoul September 13, 2013. REUTERS/Lee Jae-Won

The consumer price index rose 2.6 percent in August from a year earlier, Statistics Korea said, accelerating from a 2.2 percent rise in July, and marking its fastest rise since April 2012 when the index also gained 2.6 percent on-year.

It compared to a 2.2 percent rise tipped in a Reuters survey of analysts’ expectations.

“Seasonal factors such as the heatwave, as well as the incident related to contaminated eggs across the country lifted up fresh food prices,” said Kim Doo-un, an economist at Hana Financial Investment.

Kim said the sudden surge in prices was not from an increase in domestic demand, adding that he saw consumer prices remaining volatile through the October shopping season when South Koreans celebrate the national Chuseok holiday.

The price of eggs soared 53.3 percent in August on-year after eggs from some local farms were found to be contaminated with a potentially harmful pesticide.

The price of radish and tomatoes surged 71.4 percent and 45.3 percent respectively, pushing up the overall price gains of fresh food costs to 18.3 percent on-year.

In monthly terms, inflation gained 0.6 percent from July.

Core inflation, which strips out volatile food and fuel prices, was 1.8 percent in August, unchanged from July.

Inflation this year has lingered near the Bank of Korea’s inflation target of 2 percent as private consumption has improved.

Revised second quarter gross domestic product growth data issued released earlier on Friday showed the economy expanded 0.6 percent from a quarter earlier versus 1.1 percent growth in the first quarter.

Reporting by Cynthia Kim and Christine Kim; Additional reporting by Dahee Kim; Editing by Eric Meijer

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