Import Prices Record 44.6 Percent Growth in May

Import prices recorded the sharpest growth in May, almost reaching the level recorded immediately after the financial crisis of the late 1990s. Particularly, import prices of oil, mineral, and agricultural and marine products showed the biggest increase since the government began collecting data on import price growth.

According to the Import Price Trend report released by the Bank of Korea yesterday, import price, in terms of won, increased a whopping 44.6 percent in May from a year ago. It is the highest level in 122 months since March 1998 when the nation’s import price grew an astounding 49.0 percent. Even though import price rather fell 0.7 percent from the previous year in August 2007, it began rising later. Korea’s year-on-year import price growth rate reached 7.5 percent in October 2007 and even soared to 21.2 percent in January and 31.3 percent in April 2008.

If the influence of changes in foreign exchange rate is considered, import price grew 27.6 percent in May. That means the falling won contributed to increasing import price by 17 percentage points (38 percent).

By the stage of processing, raw material prices increased 83.6 percent in May from the previous year, setting a new high in 27 years since the central bank began releasing statistics on import prices in January 1981. Import prices of intermediate goods, capital goods, and consumer goods increased 28.8 percent, 17.5 percent, and 19.8 percent, respectively, from a year ago.

As leading indicators, a benchmark to forecast consumer price, surge, experts worry over the possibility of a rapid price increase. When Korea suffered from the financial crisis in 1998, its consumer prices soared 7.5 percent in a year since the won-dollar exchange rate surged due to the country’s falling sovereign credit rating.

In May, Korea’s consumer price jumped 4.9 percent, recording a new high in 83 months since June 2001 when it grew 5.0 percent. Also, producer prices rose 11.6 percent in May, recording a new high since October 1998 when it increased 11.7 percent in the wake of the financial crisis.

jarrett@donga.com