South Korea’s Consumer Prices Rise 1.2% From Year Earlier

South Korea’s inflation slowed to the weakest pace in 12 years in August, according to a report released 10 days before the central bank reviews interest rates.

Consumer prices increased 1.2 percent from a year earlier after a 1.5 percent gain in July, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 12 economists was for a 1.4 percent gain. Prices rose 0.4 percent from July.

Europe’s debt crisis and austerity measures are weighing on exports and confidence across Asia, weakening production and growth in countries from Japan to China to South Korea. The Bank of Korea held rates steady last month after an unexpected reduction in July. Weak inflation gives more room for another cut in the benchmark.

“A rate cut is likely in September to support growth,” Lee Min Koo, a Seoul-based economist at Eugene Investment & Securities Co. said before today’s data.

Core consumer prices, which exclude oil and agricultural products, advanced 1.3 percent in August from a year earlier.

The Bank of Korea cut its forecast for the nation’s growth this year to 3 percent from 3.5 percent on July 13 and is likely to make a further reduction in October, according to Lee Sung Kwon, a Seoul-based economist at Shinhan Investment Corp.

Signs the economy is cooling include an Aug. 29 report that the current-account surplus climbed to a record in July because of declining imports. An index measuring manufacturers’ confidence for September was at 75 from 70 the previous month, the only readings below 80 since 2009.

To contact the reporter on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Enlarge image

South Korea’s Consumer Prices Rise 1.2% From Year Earlier

SeongJoon Cho/Bloomberg

A woman is silhouetted in an observation deck at the N Seoul Tower in Seoul. Signs the economy is cooling include an Aug. 29 report that the current-account surplus climbed to a record in July because of declining imports.

A woman is silhouetted in an observation deck at the N Seoul Tower in Seoul. Signs the economy is cooling include an Aug. 29 report that the current-account surplus climbed to a record in July because of declining imports. Photographer: SeongJoon Cho/Bloomberg