By Lee Hyo-sik
Staff Reporter

Consumer prices rose 4.4 percent in July from the same month last year, a 16-month high since March 2003 while those of living necessities jumped 5.8 percent for the highest increase in 35 months.

The National Statistical Office (NSO) reported Monday that the consumer price index for living necessities, consisting of 154 basic items such as rice and ramyon, increased 5.8 percent in July from the same month last year and 0.9 percent from a month earlier.

It was a 35-month high since August 2001 when prices jumped 6.0 percent year-on-year because the prices of basic food items, education costs and utility charges, all jumped significantly, putting more pressure on household budgets.

General consumer prices went up 4.4 percent, due to hikes in the prices of agricultural and fisheries products and public services and utilities.

Consumer prices also jumped 0.6 percent in July from a month earlier, pushing the consumer price index to 114.9 last month from 114.2 in June, according to the NSO.

The consumer price index measures changes in individual and household consumption as the prices of 516 various products and services fluctuate, with a base of 100 set at 2000 prices.

Although the average 2004 monthly consumer price increase through July stands at a government target range of 3.5 percent, it is predicted to be increasingly difficult to control during the second half of the year because of potential hikes in crude oil prices aggravated by volatile world oil supplies, the NSO officials said.

Some local economists said that South Korea could experience stagflation, in which a country suffers from a rapid increase in consumer prices as well as a stagnant economy, amid sluggish domestic consumption and a slowdown of exports.

Other economists, however, insisted that the steep rise in consumer prices is a temporarily phenomenon, resulting from an earlier than expected rainy season and price hikes in various public services in July.

In the meantime, the consumer price index for fresh foods, consisting of agricultural, fisheries and dairy products, also skyrocketed 18.6 percent in July from the same month last year and 4.7 percent from June.

Even the consumer price index, excluding agricultural products and oils, significantly rose 3.1 percent year-on-year and 0.3 percent from the previous month.

Among regions, the consumer prices rose 4.6 percent in Seoul, 5.0 percent in Kwangju, and 4.6 percent in Ulsan in July from a year ago because the public transportation fees and various utility charges sharply increased, while Pusan and Taegu showed a relatively lower price increase of 3.7 percent and 3.5 percent.

The NSO officials stressed that the consumer prices rose more than expected in July due to a prolonged rainy season, sharply raising the prices of the agricultural produces, while price hikes occurred in public services, including subway and air fares, amid crude oil prices.

The heat wave that has recently been gripping the country and upcoming typhoons could raise the prices of agricultural produces such as fruits and vegetables and thus elevate the consumer prices even higher in August and September.

International oil prices are expected to play a pivotal role among other factors, in determining whether the government is able to retain its price target for the rest of the year, NSO officials said.

leehs@koreatimes.co.kr