South Korea inflation slows in October, core CPI declines at fastest pace in over 21 years

FILE PHOTO: A street vendor counts his money at the Namdaemun Market in Seoul, South Korea, May 30, 2017. REUTERS/Kim Hong-Ji

SEOUL (Reuters) - South Korea’s annual inflation slowed in October and the core rate declined at its fastest pace in over 21 years as the coronavirus pandemic dampened domestic demand and a temporary government subsidy on mobile phone bills dragged on the data.

The consumer price index rose 0.1% in October from a year earlier, Statistics Korea data showed, well below a median 0.7% rise tipped in a Reuters survey and the lowest figure in four months. Inflation accelerated 1.0% in September.

Core CPI for October, excluding volatile energy and food prices, declined 0.3% year-on-year, marking the sharpest fall since September 1999 and much slower than a 0.6% rise the previous month. Month-on-month, core inflation tumbled 0.7% in October, the worst reading since core data began to be compiled in 1990.

“The government’s 20,000 won ($17.65) phone bill subsidy as part of the fourth supplementary budget temporarily pulled down the core and headline data,” a government official told Reuters, adding the core rate will likely return to a positive territory in November.

The government has rolled out a total 310 trillion won ($274 billion) stimulus, including the 7.8 trillion won extra budget approved in late September, to soften coronavirus impacts on households and small businesses amid tight social distancing restrictions.

Headline consumer prices, meanwhile, unexpectedly fell 0.6% from a month earlier versus a 0.1% rise tipped in the poll.

Reporting by Joori Roh; Editing by Richard Pullin