Producer Prices Rise for Seventh Consecutive Month Amid Mixed Trends

The producer price index rose for the seventh consecutive month last month, driven by the ripple effects of soaring international oil prices due to the ongoing conflict in the Middle East, which have affected chemical products and airfares.

According to preliminary statistics released by the Bank of Korea on June 19, the producer price index for May was recorded at 129.82, reflecting a 0.8% increase from the previous month.

The producer price index has been on the rise since November of last year. While prices surged last month due to skyrocketing oil prices, marking the largest increase since February 1998, the growth rate has shown signs of slowing.

By category, agricultural, forestry, and fishery products fell by 0.8% compared to the previous month, while industrial products rose by 0.7%. Electricity, gas, water, and waste services increased by 0.5%, and services overall rose by 1.2%.

While agricultural products (-3.9%) and coal and oil products (-2.3%) saw declines, seafood (3.6%), chemical products (1.8%), computers, electronics, and optical devices (1.6%), and primary metal products (1.4%) experienced increases. Financial and insurance services rose by 8.3% year-on-year, driven by increased brokerage fees amid a strong stock market. Transportation services also saw a 1.2% rise due to increased fuel surcharges on airfares.

Notably, the price of chamoe (Korean melon) plummeted by 38.6%, while other fish (40.6%), sulfuric acid (58.7%), container boxes (11.6%), computer memory (15.2%), and DRAM (9.5%) all increased.

Lee Moon-hee, head of the price statistics team at the Bank of Korea, explained, "While coal and oil products have turned downward, the impact of the sharp rise in oil prices following the Middle East conflict is being felt with a lag in chemical products, industrial gas, and air services."

The domestic supply price index, which includes imported goods, remained stable compared to the previous month. Intermediate goods (1.2%) and final goods (0.3%) increased, but raw materials fell by 8.1%. By use, services (0.5%) and capital goods (0.2%) saw increases.

The total output price index, which includes domestic shipments and exports, rose by 1.2% compared to the previous month. Agricultural, forestry, and fishery products fell by 0.4% due to decreased domestic shipments, but industrial products increased by 1.4% as both exports (2.3%) and domestic shipments (0.7%) rose.

In particular, industrial products surged by 16.7% year-on-year, reaching the highest level since statistics began in 2010, primarily driven by exports.

Lee noted, "The increase in export prices, particularly in computers, electronics, and optical devices, is significant compared to domestic prices, indicating improved trade conditions and increased overseas sales for domestic producers."

He added, "International oil prices have shown a downward trend in June, and the U.S.-Iran agreement on a ceasefire may contribute to stabilizing oil prices. However, the pace of recovery of oil facilities in the Middle East and the normalization of shipping routes in the Strait of Hormuz could affect the trends of international oil prices and domestic oil product prices."