Bank of Korea Expects Inflation Near 3% in November as Core Price Pressures Persist
Key Facts
The Bank of Korea expects inflation in South Korea to remain in the upper 2% range in November, as global oil prices and the core inflation trend continue to weigh, Yonhap reported, citing the central bank on Nov. 3. The outlook came after annual consumer price inflation eased to 2.8% in October from 2.9% in September. But the core measure, which excludes food and energy, also recorded an annual increase of 2.8% in October. That points to a limited easing in headline inflation without a comparable decline in the core measure. The central bank linked its forecast for next month to volatile international oil prices and the continued elevated trend in core inflation, rather than October’s reading alone.
Price details showed variation among categories. Services prices rose 2.7% year over year in October, industrial goods prices climbed 4.4%, while electricity, gas and water prices increased 0.4%. By contrast, prices of agricultural, livestock and fishery products fell 1.7%. The fresh food index also declined 6.2% year over year; fresh vegetable prices fell 11.3% and fresh fruit prices dropped 8.6%. These movements show that lower prices for some fresh food did not prevent continued increases in services and industrial goods.
Core inflation rose 0.4% from September and 2.8% from October last year, according to Statistics Korea data. The monthly reading is important for tracking whether pressures persist after food and energy are excluded, while the annual core rate remained at the same level as headline inflation. The Bank of Korea said the core inflation trend remained elevated, alongside movements in oil prices, the two factors on which it based its November outlook. The central bank had expected inflation to remain in the upper 2% range, without the report giving a more precise estimate. These signals put the path of core prices at the center of the bank’s monitoring of inflation over the coming month.
In manufacturing, a private survey showed expansion continued, but at a weaker pace. Output rose for a 10th consecutive month, supported by sustained demand for semiconductors, though the pace of increase was the weakest in that run, according to Aju Press. New orders also rose at their slowest pace since June, and some companies reported weaker demand from the automotive sector. Manufacturers said subdued orders, rising prices and raw material shortages constrained production. The reading offers a sectoral picture of manufacturing activity, pointing to continued expansion at a slower pace, rather than a contraction in overall economic activity.
In markets, South Korea’s Kospi fell 2.5% to 5,712.57 points on Nov. 3, as technology shares declined during a regional selloff in the sector, according to The Associated Press. The move came on the day the central bank issued its inflation outlook, but the news agency linked the index’s decline to technology shares and the regional selloff. The path of oil prices and core inflation, according to the factors cited by the Bank of Korea, remains a key determinant of the November price outlook. The available data do not specify when the bank will next update its forecasts or make a new monetary policy decision.