Business

Tue Jul 01 01:20:45 PDT 2008

SEOUL, July 1 (Reuters) – South Korean consumer prices in June rose 5.5 percent over a year earlier, data showed on Tuesday, beating market expectations and marking their fastest growth in nearly 10 years.

The median forecast in a Reuters poll was for the consumer price index (CPI) in June to rise 5.4 percent from a year earlier, accelerating from a 4.9 percent rise in May.

It was the strongest growth since a 6.8 percent annual gain in November 1998.

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KEY POINTS:

- Reuters poll: June consumer price index up 5.4 percent from a year earlier and up 0.5 percent from a month earlier.

- For a full story, see [ID:nSEV000434]

COMMENTARY: PARK SANG-HYUN, CHIEF ECONOMIST, CJ INVESTMENT & SECURITIES

"Consumer prices turned out as widely expected, and we expect this pace to continue until it peaks in the third quarter this year. The key factors are oil and raw material prices but an increase in public fees may add to the upward pressure in the second half of 2008.

"Also the won <KRW=> movement is crucial in inflation and it currently remains around the 1,040 won level but may grow stronger in coming months.

"The Bank of Korea will probably keep interest rates steady for this year but the direction may vary after checking money supply data due next week."

MARKET REACTION:

- Seoul stock market’s benchmark KOSPI <.KS11> pares losses slightly to 1,668.55 points, down 0.4 percent on the day, after having traded at around 1,661 points.

- September treasury bond futures <KTBc1> up 9 ticks at 105.37 at 0434 GMT and won <KRW=> up 0.1 percent on the day at 1,044.8 per dollar, both little changed from earlier levels.

LINKS:

- Full statement from the National Statistical Office available in Korean at: http://www.nso.go.kr

- For all South Korean news and data, 3000 Xtra users can click on <KOREA> <ECONKR>

BACKGROUND:

- South Korea’s annual consumer-price inflation was 4.9 percent in May and 4.1 percent in April.

- The central bank held the benchmark interest rate steady at 5.0 percent for a 10th consecutive month in June after back-to-back quarter-point hikes in July and August last year.

- Goods prices have a 45 percent weighting in South Korea’s consumer price index, compared with 55 percent for services prices.

(Reporting by Lee Jin-joo; Editing by Keiron Henderson; Seoul Newsroom)

Provided by Reuters

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