South Korea Inflation March 2008

Consumer prices accelerated slightly in March even as industrial production, investment and consumption are weakening. According to the National Statistics Office (NSO), consumer prices rose 3.9 percent in March over March 2007, up from a 3.6 percent gain in February, as surging crude oil and other international raw material prices raised costs of goods and services in Korea.



Seasonally adjusted inflation rose 0.9 percent from a month earlier, the largest increase since January 2005 when the month-on-month inflation jumped 1 percent. The 3.9 percent year-on-year growth is above the Bank of Korea's target range of 2.5 percent to 3.5 percent. The government is committed to trying to contain rises in consumer prices to below 3.3 percent this year.

Consumers felt the inflation burden more heavily last month since the cost of living index, consisting of food and other daily necessities, increased at 4.9 percent from a year ago, according to the statistical office. Manufacturing goods were up 6.3 percent, reflecting a steep rise in raw material costs, while prices of agricultural, fisheries and livestock goods fell 1.3 percent.

According to the statistical office, industrial output grew 10.1 percent in February from a year earlier, down from an 11.3 percent gain in January. Growth was lower than the market consensus of 12 percent and seasonally adjusted production fell 0.2 percent from a month earlier. Retail sales expanded 3 percent from a year earlier, down from a 4.6 percent year-on-year gain the previous month, while corporate facility spending on machinery and telecommunications declined 1.9 percent and orders received by construction companies also fell 6.2 percent.