South Korea sees sharpest rise in consumer prices in 8 months

South Korea's consumer prices rose the most in 8 months in April as lower base effect of the same month a year earlier raised the headline inflation, a government report showed Thursday. Consumer prices increased 1.5 percent in April on year, the highest since August last year when the prices gained by the identical figure of 1.5 percent, according to Statistics Korea. The headline inflation remained in the lower end of 1 percent in January and February before accelerating to 1.3 percent in March. The rising pace accelerated further in April. Lower farm goods prices contained the consumer price inflation at the 1 percent level, but the relatively low level of inflation last year raised the prices figures this year. In 2013, the consumer price inflation remained low as policy effects, including free childcare and free school lunch, pulled down the consumer prices. From a month earlier, consumer prices inched up 0.1 percent, continuing its downward trend from 0.5 percent in January, 0.3 percent in February and 0.2 percent in March. Core consumer prices, which indicate a long-term inflation trend as it excludes agricultural and oil products, rose 2.3 percent in April from a year earlier, the highest in 26 months. The OECD method-based core consumer prices, which exclude food and energy items, gained 1.9 percent on year in April, up from a 1. 7 percent advance in the prior month. The headline inflation was expected to get higher in the remaining months of this year, breaching the Bank of Korea (BOK)'s inflation target range of 2.5-3.5 percent. "We expected headline CPI inflation to return to the BOK's inflation target in the second half of this year," Kwon Young-sun, a Hong Kong-based economist at Nomura, said in a report. Kwon said the BOK will focus on future demand-side inflationary pressures rather than current headline inflation figures, forecasting the central bank will raise its policy rate by 25 basis points to 2.75 percent in December. The livelihood prices, which reflect costs of key daily necessities, gained 1 percent in April from a year earlier, but fresh food prices, which gauge prices of vegetable and fruit, tumbled 12 percent last month. Prices of industrial goods and private services, which represent demand-side inflationary pressure, got higher last month, but agricultural product prices remained lower amid good crops and favorable weather conditions. Prices for agricultural, livestock and fishery products slid 3. 5 percent on year in April. Prices of pork and imported beef surged 28 percent and 13.2 percent each, but those for napa cabbage and garlic plunged 66.5 percent and 25.3 percent respectively. Industrial goods prices increased 2 percent in April from a year earlier. Durable goods prices rose 0.5 percent, but oil product prices slid 2.8 percent amid lower global oil prices. Service prices advanced 1.6 percent on year in April. Private services prices increased 1.8 percent as travel-related service costs became higher amid warmer weather. Public services prices gained 0.7 percent last month. Utility prices rose as the government raised public utility costs to contain a surge in debts of public corporations. Prices for electricity, tap water and gas gained 4.2 percent on year in April.