Roundup: S. Korea's inflation stays at zero-pct level for 8 months

South Korea's consumer price inflation stayed at a zero-percent level for eight months in a row, boosting worries that the economy may fall into deflation amid an economic slump.

Consumer prices rose 0.7 percent in July from a year earlier, posting an identical increase with the previous month, according to Statistics Korea.

The headline inflation fell below 1 percent in December 2014 and declined to 0.4 percent in March before gaining to 0.5 percent in May and 0.7 percent in June and July.

The prolonged trend of low inflation bolstered concerns over a possible slip into deflation, or a negative headline inflation along with an economic downturn.

After the outbreak of Middle East Respiratory Syndrome (MERS), Bank of Korea (BOK) lowered its policy rate by a quarter percentage point to an all-time low of 1.5 percent in June. The finance ministry unveiled a supplementary budget plan worth about 11.6 trillion won (1 billion U.S. dollars) for the second half.

Consumers refrained from outside activity, such as leisure and shopping, hampering the already faltering domestic demand. The MERS contagion fears led the economy to weaken further, with the real GDP in the second quarter growing 0.3 percent compared with the previous quarter.

The economic slowdown put a downward pressure on the demand- side inflation, but farm goods prices gained at a relatively fast pace due to the effect from dry weather.

Core consumer prices, which exclude agricultural and oil products, gained 2 percent on-year in July, staying above 2 percent for the seventh consecutive month.

The OECD-method core prices, excluding food and energy costs, increased 2.5 percent last month, keeping the 2-percent level for the past seven months.

The so-called livelihood prices, which reflect daily necessities, slid 0.1 percent in July from a year earlier, but fresh food prices, which gauge fruits and vegetables, advanced 6 percent, keeping an upward trend for three months in a row.

Prices for agricultural, livestock and fisheries products climbed 3.7 percent in July from a year earlier due to the effect of drought, but the farm goods prices slid 0.3 percent compared with the previous month after the shower eased the dry weather last month.

On a yearly basis, prices for green onion, white radish, onion, garlic and napa cabbage jumped 73.5 percent, 63.6 percent, 57.3 percent, 33.9 percent and 24 percent respectively last month.

Industrial goods prices, which reflect the demand-side inflationary pressures, slid 0.2 percent in July from a year ago. Gasoline and diesel prices tumbled 18.3 percent and 15 percent each on the back of cheaper crude oil.

Prices for electricity, tap water and natural gas tumbled 11.3 percent on-year in July as the government lowered utility costs to reduce household burden for daily livelihood.

Public service prices increased 1.6 percent in July from a year earlier, with fares for public transportation, such as subway and intra-city bus, rising sharply. Private service prices gained 1.9 percent due to higher school meal price and higher tuition fees for private educational institutions for middle-school students. Endi