• South Korea's consumer inflation has hit a four-year low, largely due to stabilizing oil prices.
• Despite this, vegetable prices have spiked due to unfavorable weather, putting pressure on households.
• The government expects to reach its target inflation rate of 2% by the end of 2024, despite the current economic slowdown.
• The country's strong manufacturing sector and robust exports, along with government measures, are expected to cushion the impact of the slowdown.

South Korea's consumer inflation has slowed to its lowest level in nearly four years, according to data released by Statistics Korea. The consumer price index, a key measure of inflation, rose by 1.3% year-on-year in October, marking a significant decrease from the 1.6% increase recorded in September.

This is the lowest level since January 2021, when consumer prices grew by just 0.9%.

The slowdown in inflation is largely attributed to stabilizing oil prices. Prices of petroleum products fell by 10.9% year-on-year in October, reflecting easing global oil prices. Dubai crude, South Korea's benchmark, averaged at US$74.94 per barrel last month, a significant drop from $89.75 a year earlier.

However, the overall agricultural, livestock, and fisheries products saw a 1.2% increase in prices year-on-year. In particular, vegetable prices spiked by 15.6% due to unfavorable weather conditions, marking the sharpest increase since October 2022.

Impact on Households and Government's Response

Prices of napa cabbages and radishes, key ingredients in the traditional Korean dish kimchi, surged by 51.5% and 52.1% respectively. This price surge is expected to put pressure on households, especially as the annual tradition of gimjang - making large amounts of kimchi in preparation for winter - usually takes place from November to December.

Despite the slowdown in inflation, the South Korean government expects the country to reach its target inflation rate of 2% by the end of 2024. This year's prices are projected to rise by 2.6%. The finance ministry has noted that consumer inflation has remained below 3% since April and fell below the target rate for the first time in September.

In terms of service prices, they gained 2.1% year-on-year in October. Core inflation, which excludes volatile food and energy prices, added 1.8%, compared with a 2% year-on-year increase in September.

Economic Outlook Amid Slowdown

The slowdown in inflation comes amid a broader economic slowdown in South Korea. The country's GDP growth has been sluggish, with the economy growing by just 0.9% in the first quarter of 2024, the slowest pace in a decade. This has raised concerns about the country's economic outlook, with some analysts warning of a potential recession.

However, despite these challenges, South Korea's economy remains resilient. The country's strong manufacturing sector, robust exports, and stable financial system have helped to cushion the impact of the slowdown. Moreover, the government has implemented a range of measures to stimulate the economy, including a $29 billion stimulus package and a series of interest rate cuts.