Inflation in Korea nears decade high, fuels fears of more rate hikes
Eui-Jin Jeong
Nov 02, 2021 (Gmt+09:00)
South Korea’s consumer inflation accelerated to a near-10-year high in October, while exports reported an eighth straight month of double-digit growth, adding to expectations that the central bank may raise interest rates further this year.
The consumer price index soared 3.2% last month from a year earlier, the fastest growth since January 2012, government data showed on Nov. 2.
Industrial product prices grew 4.3% with petroleum costs surging 27.3% on higher crude prices, according to Statistics Korea. Service prices rose 3.2%, while costs for housing rentals increased 1.8%.
Exports rose 24% to $55.6 billion in October from a year earlier, marking an eighth consecutive month of double-digit growth, Ministry of Trade, Industry and Energy data revealed on Nov. 1. The value was shy of the record-high $55.8 billion posted in September.
The country’s overseas sales totaled $523.2 billion in the first ten months, topping $512.5 billion for the entire 2020.
The ministry expected exports in 2021 to exceed the previous record of $604.9 billion posted in 2018 as the pace of overseas shipments is faster than three years ago.
Annual export value
Unit: billion dollars
※ Data for 2021 is a total value of the first 10 months.
Source: Ministry of Trade, Industry and Energy
Graphics by Jerry Lee
Export growth
Unit: %
※ year-on-year
Source: Ministry of Trade, Industry and Energy
Graphics by Jerry Lee
Semiconductor exports surged 28.8% to $11.2 billion last month, leading to overall export growth. Overseas sales of system chips, whose values are higher than memory chips, accounted for 31% of semiconductor exports so far this year, up from 20.9% in 2018.
Petroleum product exports surged 138.1%, while exports of petrochemicals jumped 68.5%. Steel exports also soared 48.6%.
Surging commodity prices are expected to weigh on exporters. The Middle East crude benchmark Dubai rose to an average of $81.585 a barrel last month, the highest since 2014, according to Reuters. That pushed up crude oil imports value by 82.9%. Imports of liquefied natural gas (LNG) and bituminous coal jumped 146.2% and 83.6%.
The higher costs of raw materials are predicted to pull down the trade balance. A trade surplus in October shrank by 70.5% to $1.7 billion from a year earlier. The surplus totaled $27 billion in the first ten months, down 16.7% on-year.
“We will try to keep the current exports momentum by actively managing risk factors such as the logistics crisis, surging commodity prices and parts shortages,” said Moon Dong-min, a deputy minister for trade and investment.
Write to Eui-Jin Jeong at justin@hankyung.com Jongwoo Cheon edited this article.