By Cynthia Kim

SEOUL (Reuters) - Consumer inflation in South Korea eased slightly in June as falling utility costs offset soaring fresh food prices, government data showed on Tuesday, with the overall price impulse suggesting a steady improvement in consumption and broad economic growth.

The consumer price index rose 1.9 percent in June from a year earlier, data showed on Tuesday, down from the 2 percent increase in May, and lagging the 2.0 percent forecast in a Reuters poll.

The index declined 0.1 percent a month earlier, after edging up 0.1 percent in May.


Asia's fourth largest economy grew at its quickest pace in six quarters in January-March period, thanks to robust construction sector activity and exports. Moderate price pressure near the Bank of Korea's target of 2 percent since early this year suggested private consumption is steadily improving.

"Agricultural product prices have been volatile, but gains in service costs have been sustaining the overall price pressure," Park Jung-woo, an economist at Korea Investment and Securities said.

Tuesday's data showed the costs for electricity, gas and tap water declined 1.6 percent on-year. That was partly offset by inflation from fresh food products, which stood at 10.5 percent in June, reflecting rapidly rising egg prices sparked by an outbreak of avian influenza.

Service costs gained 1.9 percent in June from a year earlier, driven by a 19.5 percent jump in insurance premium fees, the report showed. Package tourism costs dropped 9.1 percent from a year earlier.

"Inflation is expected hover around 2 percent throughout this year, and won't accelerate much further to a level that calls for a change in monetary policies," Park said, adding that he believes the Bank of Korea to keep the base rate at a record-low 1.25 percent for the time being.

Core inflation, which strips out volatile food and fuel prices, was up 1.4 percent, after similar growth in May.

(This version of the story corrects package tourism costs change in paragraph seven to a decline from an increase)

(Reporting by Cynthia Kim; Additional reporting by Dahee Kim; Editing by Shri Navaratnam)

Latest From ...