South Korea’s consumer prices grew at the fastest pace in 20 months and exports jumped more than projected, bolstering the case for higher borrowing costs.
The consumer price index increased 4.1 percent last month from a year earlier, quickening from a 3.6 percent advance in September, the statistics office said in Gwacheon yesterday. Exports grew 29.9 percent, more than the 16.2 percent predicted by seven economists in a Bloomberg News survey, another report showed.
The data signal pressure may grow on the Bank of Korea to end a three-month pause in -interest-rate increases. Inflation exceeded the central bank’s 4 percent ceiling even after the pace of economic expansion halved last quarter as goods shipments eased and the won surged.
“Today’s inflation and trade data further prove the current interest rate is too low and the central bank may raise rates as early as this month,” said Lim Ji-won, an economist at JPMorgan Chase & Co in Seoul, referring to the benchmark interest rate of 2.25 percent.
The Bank of Korea has increased borrowing costs only once this year, by a quarter point from a record-low 2 percent in July, after the fastest first-half economic expansion in a decade stoked price pressures. The monetary authority aims for inflation of 2 percent to 4 percent on average through 2012.
“Once prices are out of control, it will become a big challenge for policy making,” Deputy Finance Minister Kang Ho-in told reporters in Gwacheon yesterday. “It’s important to take pre-emptive measures to curb inflation pressures.”
South Korean companies have benefited from rival Japan’s struggle to restrain a larger jump in the yen against the US dollar since the start this year. Samsung Electronics Co, Asia’s biggest maker of semiconductors, flat screens and mobile phones, said last week third-quarter profit increased 17 percent to a record.
Still, the rate of expansion in Asia’s fourth-largest economy fell to 0.7 percent last quarter as the won rose 7.2 percent over the period, the most of any Asian currency, and growth in goods shipments eased.
The won’s performance has added to risks to exports from elevated US unemployment and European austerity. Samsung last week also forecast weaker fourth-quarter earnings because of falling prices and the strengthening currency. Overseas shipments account for about half the US$832.5 billion economy.
“I caution against reading too much into these data points,” Erik Lueth, a Hong Kong-based senior regional economist at Royal Bank of Scotland Group PLC, said in a note, referring to yesterday’s data.
Core inflation was flat and last month’s export numbers were “artificially” inflated because a harvest festival holiday season took place in the same month last year, he said. He expects the central bank to raise interest rates again in the first quarter of next year.
Core prices, which exclude oil and food, rose 1.9 percent last month from a year earlier, the same pace as in September, according to yesterday’s report.
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