South Korea's June inflation steady at 0.8%, domestic demand soft

[SEOUL] South Korea's annual inflation in June was unchanged from the previous month, government data showed on Friday, reinforcing a raft of recent data suggesting faltering domestic demand and an economy struggling to pick up momentum.

The consumer price index rose 0.8 per cent in June from a year earlier, Statistics Korea data showed, steady from a 0.8 per cent increase in May, which had been the lowest since January this year.

The result was in line with a median 0.8 per cent rise tipped in a Reuters survey but well off the central bank's inflation target of 2 per cent.

Recent data have shown faltering consumption after brief signs of recovery earlier this year. The government has said much of the growth in domestic consumption has been heavily reliant on government policies.

The Bank of Korea surprised markets last month by cutting interest rates to a record low 1.25 per cent, aiming to cushion the economy against weak exports and the fallout from a massive restructuring of an ailing shipping industry.

The BOK also is expected to trim its GDP growth forecast of 2.8 per cent for this year at a quarterly review in July.

Core inflation, which strips out volatile food and fuel prices, stood at 1.7 per cent in June in annual terms, ticking up from 1.6 per cent in May to a three-month high.

Month-on-month inflation showed no change.

Services inflation in June was at 2.2 per cent, unchanged for a third straight month as housing price inflation bolstered the sub-index.

South Korea's central bank governor will hold a news conference on July 14 to explain why inflation is failing to approach the bank's inflation target.

REUTERS