International Oil Prices Drop, Producer Prices Stabilize

Last month, a decline in international oil prices led to a stabilization in the producer price index for the first time in ten months.

According to preliminary statistics released by the Bank of Korea on June's producer price index, the index stood at 130.03, unchanged from the previous month. This marks the end of a nine-month streak of increases that began in September of last year.

Prices for manufactured goods fell by 0.3% compared to the previous month, influenced by the drop in international oil prices. Notable declines were seen in coal and petroleum products (-5.3%) and chemical products (-1.8%). In contrast, prices for agricultural, forestry, and fishery products rose by 0.7%, while electricity, gas, water, and waste services increased by 1.0% and services by 0.2% respectively.

Among specific items, prices for potatoes (-22.9%), other fish (-12.5%), naphtha (-23.5%), and jet fuel (-23.4%) saw significant declines. Conversely, prices for computer memory (10.3%), industrial instruments (18.2%), and industrial city gas (10.6%) increased.

Lee Moon-hee, head of the price statistics team at the Bank of Korea, stated, "Wholesale prices for industrial city gas rose as the spike in international oil prices following the Middle East conflict was reflected in raw material costs with a lag. Service prices increased primarily due to higher commission fees in financial and insurance services, driven by rising stock prices."

The domestic supply price index, which includes price fluctuations for imported goods, rose by 0.7% compared to the previous month. Prices for intermediate goods (0.5%), raw materials (2.1%), and final goods (0.5%) all increased. The rise in the won-dollar exchange rate and the reduced impact of the previous month's drop in international oil prices on customs import prices contributed to this increase.

The total output price index, which includes domestic shipments and exports, rose by 0.4% from the previous month. Agricultural, forestry, and fishery products saw a 0.9% increase due to both domestic shipments and exports rising. While domestic shipments of manufactured goods decreased, exports increased, resulting in a 0.4% rise compared to the previous month.

Lee added, "The average international oil price based on Dubai crude from July 1 to 20 fell by about 10% compared to the previous month, and surcharges for air cargo and passenger flights have also decreased, contributing to downward pressure. However, the potential for renewed military conflict between the U.S. and Iran and further increases in wholesale prices for industrial city gas present upward pressures, creating a mixed outlook for prices."