South Korea's agricultural, livestock, and fishery import price index rose 10.8% in June compared to the same month last year, marking the first double-digit increase in 42 months, according to data from the Korea Trade Statistics Promotion Agency released on July 22. The surge was driven by the high won-dollar exchange rate, which averaged 1,527.30 won in June—more than 160 won higher than the 1,366.95 won recorded a year earlier. The development adds pressure to household food costs as the country's consumer price inflation has remained above 3% for two consecutive months in May and June.
Livestock Prices Lead Category Increases at 17.6%
The June agricultural, livestock, and fishery import price index stood at 128.3 (base year 2020=100), according to the Korea Trade Statistics Promotion Agency. This represented the highest year-over-year growth rate since December 2022, when the index rose 11.3%. The index has shown accelerating growth throughout the year, rising 1.9% in January, 5.0% in February, 3.0% in March, 4.8% in April, 7.5% in May, and 10.8% in June. On a month-over-month basis, the index increased 2.8% in June, a larger jump than the 1.3% recorded in April and 1.2% in May.
By category, livestock prices surged 17.6% year-over-year, while fishery products climbed 8.4% and agricultural goods rose 4.4%. In contrast, dollar-denominated import prices for agricultural, livestock, and fishery products increased only 0.1% compared to the same month last year.
Exchange Rate Amplifies Import Costs Despite Stable Dollar Prices
The won-dollar exchange rate averaged 1,527.30 won in June, according to the Bank of Korea's economic statistics system. This marked an increase of more than 160 won from the 1,366.95 won average recorded in June of the previous year. The disparity between the 0.1% increase in dollar-based import prices and the 10.8% rise in won-based prices demonstrates the exchange rate's dominant role in driving import cost inflation.
Although foreign exchange market conditions have improved in July—with foreign investors returning to net buying of domestic stocks and capital inflows from SK Hynix's American Depositary Receipt listing in the United States—the exchange rate has remained in the late 1,400-won range, continuing to pressure import prices.
KDI Warns of Gradual Inflation Slowdown Amid Persistent Exchange Rate Effects
The Korea Development Institute stated in its July economic trends report released on July 8 that "despite the decline in international oil prices, the impact of the prolonged high exchange rate will spread with a time lag, and the slowdown in consumer price inflation is likely to be gradual." Import prices typically affect consumer prices with a one-to-three-month lag, raising the likelihood that exchange rate-driven inflation pressure on household food costs will intensify in the second half of the year.
Consumer price inflation recorded 3.1% in May and 3.2% in June. Lee Seung-hoon, a researcher at Meritz Securities, forecast that July's consumer price index would rise 2.7% year-over-year, adding that inflation rates would reach 3.1% in August and 3.0% in September when accounting for the base effect from telecommunications fee reductions in August of the previous year. Rising international oil prices due to renewed tensions in the Middle East region also pose a variable for inflation.
FAQ
What caused South Korea's agricultural import prices to rise 10.8% in June?
The 10.8% increase in South Korea's agricultural, livestock, and fishery import price index in June was driven by the high won-dollar exchange rate, which averaged 1,527.30 won—more than 160 won higher than the previous year. Dollar-denominated import prices rose only 0.1%, indicating the exchange rate was the primary factor.
How did different agricultural categories perform in June's import price data?
Livestock prices led the increases with a 17.6% year-over-year surge, followed by fishery products at 8.4% and agricultural goods at 4.4%, according to the Korea Trade Statistics Promotion Agency's data released on July 22.
What is the outlook for South Korea's consumer price inflation in the coming months?
The Korea Development Institute stated in its July 8 economic trends report that consumer price inflation slowdown is likely to be gradual due to the time-lagged impact of prolonged high exchange rates. Meritz Securities researcher Lee Seung-hoon forecast July consumer price inflation at 2.7%, with rates reaching 3.1% in August and 3.0% in September.
