"Prices Dropped?" Turns Out to Be an Illusion Due to Telecom Fees... Food Prices 'Soar' (Comprehensive)

[Financial News] The August consumer price inflation rate fell to 1.7% due to the impact of telecom fee reductions. Mobile phone fees plummeted by 21% compared to the same month last year, temporarily halting the rise in prices. It is estimated that if there had been no changes in telecom fees, the inflation rate would have reached 2.3%. Prices of agricultural, livestock, and fishery products surged by nearly 5%. This is the largest increase in 13 months. Despite the high food prices, perceived inflation remains high.

 According to Statistics Korea on the 2nd, the August Consumer Price Index (CPI, 2020=100) was 116.45, up 1.7% compared to the same month last year. This is the lowest level in nine months since November last year (1.5%). It fell by 0.4%p compared to the previous month (2.1%). 
 This price slowdown was decisively influenced by the reduction in telecom fees. 
 SK Telecom reduced fees for all subscribers by 50% for the month of August as compensation for a hacking incident, causing mobile phone fees to drop by 21.0% compared to the previous year. This is the largest drop since the government’s nationwide telecom fee support of 20,000 won in October 2020 (-21.6%). As a result, public service fees fell by 3.6%, pulling down the overall price level by 0.42%p. It is analyzed that if telecom fees had remained at previous levels, prices would have soared to 2.3%.
 Lee Doo-won, Director of Economic Trend Statistics at Statistics Korea, said in a briefing, "The main reason for the 0.4%p reduction in the inflation rate was the impact of the mobile phone fee reduction," adding, "Excluding the reduction in mobile phone fees, the inflation rate would be around 2.3%." He added, "Since the mobile phone fee was temporarily reduced this August, it may rise slightly next month due to this effect."
 Price pressure remains high. In particular, prices of agricultural, livestock, and fishery products rose by 4.8% compared to the same month last year, marking the largest increase in 13 months. The heatwave and drought reduced the supply of vegetables and fruits, while reduced imports and decreased catches compounded the issue.
 Items with significant price increases compared to the same month last year include glutinous rice (45.6%), peaches (28.5%), mackerel (13.6%), rice (11.0%), pork (9.4%), and domestic beef (6.6%). Compared to a month ago, paprika (52.1%), cabbage (51.6%), spinach (50.7%), and tomatoes (35.9%) saw significant jumps.
 Seafood (7.5%) and livestock products (7.1%) also rose due to reduced supply. Seafood recorded the largest increase in two years and six months since February 2023 (8.2%).
 Domestic beef saw the largest increase in three years and seven months since January 2022 (7.6%). Pork also saw the largest increase in three years and one month since July 2022 (9.5%). Grains rose by 14.7% compared to the previous year, with the upward trend accelerating. Processed foods rose by 4.2%, led by kimchi (15.5%) and coffee (14.6%). The end of discounts on some items contributed to the price increase.
 The core inflation index, excluding food and energy, based on the OECD method, rose by 1.3%. It fell significantly compared to the previous month (2.0%).
 The living cost index, which is composed mainly of frequently purchased items and is close to perceived inflation, rose by 1.5%. It also fell compared to the previous month (2.5%).
 Among the living cost index, 'food' rose by 3.9%, while 'non-food' fell by 0.1%.
 However, this is seen as a temporary stabilization of prices due to temporary factors, and caution is needed regarding future trends. The government views this price slowdown as a temporary phenomenon and is monitoring the increase in demand around Chuseok and the trend of energy prices.

imne@fnnews.com Hong Yeji Reporter