Sunday, March 16, 2008

Import price growth hits 9-year high

Import price growth hits 9-year high

SEOUL, March 16 (Yonhap) -- South Korea's import prices grew at their fastest pace in over nine years in February due mainly to soaring oil costs, the central bank said Sunday, adding to concerns about the already rising inflation rate.

Import prices in local currency terms jumped 22.2 percent in February from a year earlier, picking up from a 21.2 percent gain the previous month, according to the Bank of Korea (BOK). Compared with a month earlier, import prices climbed 2.7 percent after rising 3 percent the previous month.

The February prices marked the fastest increase since October 1998, when import prices grew 25.6 percent, the BOK said.

"Prices of raw materials and intermediate goods rose amid the South Korean currency's weakness against the U.S. dollar and rising oil prices," the BOK said. Raw material prices surged 49.4 percent on-year last month.

The price of Dubai crude, South Korea's benchmark, jumped 61 percent in February compared with a year earlier. South Korea, the world's fifth-largest crude buyer, relies entirely on imports for its oil needs.

The data comes amid heightened concerns over inflation amid a weaker won. South Korea's consumer price growth slowed to 3.6 percent in February from 3.9 percent in January, but inflation breached the BOK's target range of 2.5 to 3.5 percent for the third month in a row.

The South Korean won fell 1.5 percent against the U.S. dollar on Friday, following a dollar-buying spree among foreign investors after pulling money out of local equities. A weaker won helps improve exporters' earnings by making their products cheaper in overseas markets, but puts upward pressure on inflation.

On March 7, the BOK set its new benchmark rate, the base rate, at 5 percent for March as rising inflationary pressures outweigh growing concerns over a slowdown of the economy.

BOK Gov. Lee Seong-tae warned of rising inflation after a rate-setting meeting, saying that inflation for the full year could be higher than the bank's previous forecast. The central bank forecast consumer prices to grow 3.3 percent this year, up from a 2.5 percent gain last year.

Meanwhile, won-based export prices grew 7.6 percent year-on-year last month as higher oil prices raised the price of industrial goods.

In dollar terms, import prices grew 19.4 percent in February from a year earlier, with export prices gaining 5 percent, the BOK said.

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