Inflation Picks Up

Data from South Korea showed inflation rose above estimates in January. CPI rose 0.8% M/M (est. 0.3%) and 0.6% Y/Y (est. 0.5%), core prices rose 0.9% (est. 0.8%)

• The increase has been attributed to a increase in grocery shopping ahead of LNY holiday's.
• The pickup comes despite Korea maintaining tight social distancing measures as the country continues to enforce containment measures, COVID-19 cases still hover around 500 per day. Food prices tend to jump ahead of the New Year holiday, which starts Feb. 11 this year, and they rose 3.8% in January, higher than in 2020 and 2019.
• There could be some downside pressure on February's reading. Social distancing measures have bene extended to Feb 14, which will mean reduced spending/activity on LNY. The roll out of vaccinations and any further stimulus from the government will be key to the economic recovery moving forward.
• Elsewhere South Korea's public sector employment decreased nearly 18%in 2020 from a year ago due to a one-off factor, government data showed.
• USD/KRW closed yesterday at 1116.20, the won eking out some gains as the session wore on. USD has enjoyed some strength today which is likely to put upward pressure on the rate. At these levels we are still near recent highs of 1121.40, and last made it above here in mid-November 2020.
• Markets will also look to equity flow data, contacts note there has been a return to offshore inflows after 4 consecutive days of outflows.