South Korea's import prices rose for the first time in four months in September, as a sharp jump in global oil prices outweighed a stronger won.
The import price index stood at 159.37 in September on a won basis, up 1.7% from the previous month, according to preliminary data released by the Bank of Korea on the 16th. The index had fallen for three straight months — down 4.2% in June, 1.0% in July and 2.2% in August — before turning higher. The year-on-year increase widened to 17.6% from 15.9% in August.
Crude oil drove the gain. The won averaged 1,359 per dollar last month, 3.4% stronger than the 1,406.3 average in August. But Dubai crude surged 28.1% over the same period, to $113.71 a barrel from $88.75, as the prolonged conflict in the Middle East pushed prices higher. Measured in contract currencies, which strips out exchange-rate effects, import prices rose 4.9% from the previous month — three times the won-based increase. Among individual items, crude oil climbed 21.6%, jet fuel 14.1% and bunker-C fuel oil 5.6%.
The renewed surge in import prices is deepening concerns about a mismatch between fiscal and monetary policy. Higher import prices feed through to domestic consumer prices with a lag. The central bank raised its base rate by 25 basis points in both July and August to contain inflation and has signaled it will maintain a tightening stance. The government, however, has drawn up a budget of more than 800 trillion won for next year — the first time spending has exceeded that level — pointing to expansionary fiscal policy that analysts say could add to price pressures.
Lee Heung-hoo, head of the Bank of Korea's price statistics team, said both the exchange rate and global oil prices have fallen from the previous month through the middle of October, which could work as a downward factor for import prices. "But uncertainty remains high over how the conflict in the Middle East unfolds," the official said.