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October Inflation Firmer Than Forecast

SOUTH KOREA

South Korean October inflation figures were stronger than expected. Headline m/m rising 0.3% (forecast 0.2%, 0.6% prior). Headline rose to 3.8% in y/y terms (3.6% forecast, 3.7% prior). Core inflation ex food and energy rose 3.2% y/y (forecast 3.1%, prior 3.3%).

  • Headline pressures are comfortably off the July trough (2.3% y/y). The core measure edged down to 3.2% but is moving lower at a gradual rather than dramatic pace. The chart below overlays headline y/y versus core. The Oct uptick is also consistent with some recovery in inflation expectations for households.
  • In terms of the detail, most of the m/m gain was in transport, +1.3% m/m. Clothing rose 0.5%, furnishings rose 0.4%.
  • In y/y terms, we had 7 out of 12 sub categories record either the same y/y pace or firmer relative to September. Food +6.7% y/y, clothing at 8.1%y/y, were the strongest performers.
  • Whilst base effects for headline CPI improve modestly in Nov/Dec, the authorities are likely to stay vigilant in terms of inflation risks. South FinMin Choo noted prior to today's data that inflation pressures were coming down at a slower pace than expected.

Fig 1: South Korea Headline & Core CPI Y/Y

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South Korean October inflation figures were stronger than expected. Headline m/m rising 0.3% (forecast 0.2%, 0.6% prior). Headline rose to 3.8% in y/y terms (3.6% forecast, 3.7% prior). Core inflation ex food and energy rose 3.2% y/y (forecast 3.1%, prior 3.3%).

  • Headline pressures are comfortably off the July trough (2.3% y/y). The core measure edged down to 3.2% but is moving lower at a gradual rather than dramatic pace. The chart below overlays headline y/y versus core. The Oct uptick is also consistent with some recovery in inflation expectations for households.
  • In terms of the detail, most of the m/m gain was in transport, +1.3% m/m. Clothing rose 0.5%, furnishings rose 0.4%.
  • In y/y terms, we had 7 out of 12 sub categories record either the same y/y pace or firmer relative to September. Food +6.7% y/y, clothing at 8.1%y/y, were the strongest performers.
  • Whilst base effects for headline CPI improve modestly in Nov/Dec, the authorities are likely to stay vigilant in terms of inflation risks. South FinMin Choo noted prior to today's data that inflation pressures were coming down at a slower pace than expected.

Fig 1: South Korea Headline & Core CPI Y/Y

Keep reading...Show less