As the Chuseok holiday approaches, a familiar narrative emerges: the government announces various measures to alleviate the financial burden of holiday shopping. Surveys conducted by research organizations claim that prices for traditional holiday items have significantly decreased. But is this true? A visit to the supermarket reveals a different story. The prices of basic items like apples, pears, and green peppers are shockingly high, leading to what is commonly referred to as the 'shopping basket price.' Since the COVID-19 pandemic, these prices have surged rapidly. The increase in housing and real estate costs has also contributed to rising prices for goods and services, as merchants pass on their higher costs to consumers.
The price index is often measured through the consumer price index, producer price index, and GDP deflator. Recently, the government reported that the per capita gross national income (GNI) has increased by over 26% in the second quarter of this year. However, this figure does not account for inflation, indicating that prices have risen correspondingly. The use of real GDP to assess economic growth is standard because as national income increases, consumer spending naturally rises, leading to higher prices. Additionally, recent increases in taxes and non-consumption expenditures may have shifted consumer spending patterns. If rising prices are primarily driven by increased semiconductor exports, it suggests that consumers have sacrificed some purchasing power for the sake of exports. The issue of exchange rates also plays a role; as the exchange rate rises, export companies may earn more, but the domestic currency's value decreases, leading to higher prices.
In South Korea, the consumer price index is a widely referenced statistic. In August, it showed a 3.1% increase compared to the same month last year. However, this figure excludes costs like housing, which could make it appear lower. A trip to the supermarket reveals that prices have indeed risen significantly. While the price index for agricultural, livestock, and fishery products decreased by 2.6% year-on-year in August, the overall living cost index rose by 3.2%, slightly higher than the consumer price index. This discrepancy is one reason why the consumer price index does not always align with the public's perception of inflation. Therefore, the consumer price index should be viewed as a trend rather than taken at face value.
Looking beyond South Korea, the United States is also grappling with inflationary pressures, largely due to the ongoing war. Despite having substantial oil reserves, prices in the U.S. remain significantly higher than in South Korea. For instance, if oil is priced at $5 per barrel, it translates to about 7,000 won, or over 2,000 won per liter when converted. The prices of industrial products derived from oil have also risen, contributing to overall inflation. However, in the U.S., a significant proportion of home purchases are financed with long-term fixed-rate mortgages. As interest rates rise, moving to a new home becomes more challenging due to increased payments, which has led to a decline in new home prices since the COVID-19 pandemic. Consequently, the rate of increase in housing costs is lower than in South Korea.
Currently, the most significant factors affecting domestic prices are oil prices and economic growth. The volatility of oil prices is influenced by the ongoing war, and the government has introduced policy changes, including tax reforms, in response to rising oil prices. As inflation occurs alongside economic growth, the government must implement microeconomic and macroeconomic policies to prevent excessive price increases due to price collusion or events. This is crucial because certain sectors impact economic growth, and without significant job creation, income levels do not rise, forcing citizens to bear the burden of high prices. This situation contributes to the perception that living costs are becoming increasingly difficult, and it is one of the reasons for the deepening polarization of income and assets over the long term.
* This article has been translated by AI.
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