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Roundup: S.Korea's headline inflation falls to 16-month low in Aug.

Xinhua, September 1, 2016 Adjust font size:

Headline inflation in South Korea fell to the lowest in 16 months due to lower crude prices and a cut in electric charges, a government report showed on Thursday.

Consumer prices rose 0.4 percent in August from a year earlier, according to Statistics Korea. It was the slowest increase in 16 months since April 2015, staying below 1 percent for four months in a row.

Oil product prices tumbled 8.8 percent on cheaper crude oil, dragging down the consumer price inflation by 0.37 percentage points.

Prices for electricity, tap water and gas plunged 12.6 percent as the government made a temporary cut in power rates during the summer season between July and September, pulling down the headline inflation by 0.57 percentage points.

Farm goods prices, however, gained 1 percent over the year in August as a scorching heat reduced vegetable crops. Fishery product prices jumped 6.5 percent, raising the inflation by 0.07 percentage points.

The finance ministry said in a separate statement that the lower inflation came mainly from temporary factors, expecting the consumer price inflation to pick up from October when the temporary cut in electric charges end.

Weaker inflationary pressures may encourage Bank of Korea (BOK) to cut its benchmark interest rate further from the current record-low rate of 1.25 percent amid the delayed economic recovery.

However, the BOK is widely forecast to refrain from altering the rate as the U.S. Federal Reserve could raise interest rates at least once within this year.

Services prices gained 1.9 percent over the year in August as housing rents advanced at a fast pace. Clothing and shoes prices increased 2.0 percent, and those for restaurant and lodging costs climbed 2.3 percent.

Core prices, which exclude volatile agricultural and oil products, rose 1.1 percent last month, with the OECD-method core prices that exclude food and energy costs picking up 1.7 percent.

The so-called livelihood prices, which reflect daily necessities, shed 0.6 percent in August, the first fall in 11 months since September 2015.

Fresh food prices that reflect vegetable and fruit advanced 2.8 percent as the heat wave reduced crops. It posted the rebound in three months.

Prices for napa cabbage and green chilli pepper surged 58 percent and 30.9 percent each, with spinach prices soaring 30.7 percent. Crab prices jumped 45.1 percent, while beef prices advanced 13.7 percent.

Among public services costs, sewerage service fees gained 16.1 percent, with those for outpatient treatment services rising 2.0 percent. Costs of hospitalization increased 2.2 percent.

Tuition fees for high school students at private academies gained 2.7 percent, with prices for alcohol Soju jumping 13.2 percent. Costs for joint maintenance of apartments advanced 3.5 percent.

Industrial goods prices shed 0.5 percent on the back of lower oil product prices. Endit