South Korean economy is facing consumer price instability amid higher oil prices, the finance ministry said Tuesday. "Our economy saw employment maintain its recovery trend, and major economic indicators improved due to seasonal factors. But, price instability factors continued amid a rise in oil prices," the Ministry of Strategy and Finance said in a so-called Green Book, a monthly report assessing the nation's economic conditions.

The country's consumer price growth decelerated to 3.1 percent in February from 3.4 percent a month before, but inflation expectation remained at an annual rate of 4.0 percent, the upper ceiling of the Bank of Korea (BOK)'s target band 2-4 percent.

Petroleum product prices kept its upward trend amid high oil prices. Prices for Dubai crude oil, South Korea's benchmark, closed at 121.09 U.S. dollars a barrel on Monday. The price averaged 120.99 dollars per barrel this month, higher than an average price of 116.18 dollars the previous month.

The ministry cautioned that uncertainties surrounding a rise in oil prices grew sharply amid lingering external uncertainties such as Europe's fiscal crisis and the possible global economic downturn. The ministry said it would closely monitor economic conditions at home and abroad, promising that it would strengthen its policy response to achieve economic recovery along with stable prices.

Meanwhile, the labor market conditions continued to improve. The number of people employed reached a whopping 536,000 in January, creating more than 400,000 jobs for the fourth consecutive month. Continued job growth in the service sector boosted the country's labor market.

Output in the mining and manufacturing sector unexpectedly expanded 3.3 percent on-month in January, and the production in the service sector grew 1.1 percent. Facility investment surged 16. 1 percent on-month in January, and construction investment also grew 12.6 percent over the same period.

The on-year growth of exports shifted to 22.7 percent in February from minus 7 percent in January, and the trade balance turned to a surplus 2.2 billion dollars in February from a deficit of 2.03 billion dollars the previous month. The turnaround was mainly attributed to the one-off factor such as the movement of the Lunar New Year holiday to January this year from February last year.