SEOUL, Oct. 21 (AJP) — South Korea’s producer inflation plateaued in September as weaker chip prices and a stronger won offset holiday food demand and higher utility charges.
The producer price index rose 0.2 percent from August to 129.78, according to the Bank of Korea (BOK), while the annual increase slowed to 7.7 percent from 7.9 percent. August’s monthly gain was revised down to 0.1 percent from the preliminary 0.2 percent.
Underlying price momentum softened. The index excluding food and energy was unchanged on month, while its annual increase slowed to 7.7 percent from 8.1 percent in August.
The breakdown marked a shift from August, when energy and semiconductor prices helped drive producer inflation higher. Chip prices retreated in September, although energy costs continued to rise.
Computer, electronic and optical equipment prices fell 1.7 percent from August, with semiconductor prices down 1.3 percent.
Computer memory device prices dropped 11.8 percent, although DRAM prices remained 418.1 percent higher than a year earlier.
The BOK said the stronger won helped lower producer prices for DRAM, flash memory and OLED panels, which are commonly priced in dollars even in domestic transactions.
Food and utility costs nevertheless kept the headline index rising.
Agricultural, forestry and fishery prices climbed 2.6 percent from August. Agricultural products rose 3.7 percent and livestock prices increased 2.7 percent amid holiday demand. Cabbage prices jumped 42.9 percent and beef prices rose 10.4 percent.
Electricity, gas, water and waste prices increased 1.3 percent, led by a 13.4 percent rise in residential electricity prices after a summer discount under the progressive tariff system expired.
Services prices edged down 0.1 percent as hotel and other tourism accommodation prices declined.
The stronger currency also helped contain costs across the domestic supply chain.
The domestic supply price index was unchanged from August after falling 1.3 percent the previous month. Raw-material prices rose 3.2 percent, but intermediate and final goods prices each declined 0.3 percent.
Imported intermediate-goods prices fell 2.4 percent, while imported final-goods prices dropped 2.6 percent.
The BOK said the figures reflected both lags in the pass-through of earlier oil-price movements and a 3.4 percent decline in the dollar-won exchange rate during September.
The total output price index, which includes exports as well as domestic shipments, fell 0.1 percent for its third consecutive monthly decline. Export prices within the index dropped 0.9 percent, while industrial-product prices fell 0.4 percent.
Upstream cost pressures, however, remained elevated.
Coal and petroleum product prices rose 0.9 percent from August and 53.6 percent from a year earlier. Chemical product prices increased 1.0 percent on month and 17.5 percent on year. The broader energy index rose 1.3 percent and 11.4 percent, respectively.
The BOK said declining international oil prices through mid-October could weigh on producer prices this month, while higher industrial city gas tariffs and fuel surcharges for air cargo and passenger flights could push in the opposite direction.
Elevated intermediate-goods prices and accumulated production costs could eventually feed through to consumer inflation, it added.
The mixed price picture comes a day before the BOK’s Monetary Policy Board meets Thursday, with the central bank widely expected to hold its base rate at 3.00 percent after back-to-back quarter-point increases in July and August.
An AJP poll of seven economists published Monday found broad expectations for a pause this week, but most respondents anticipated further tightening.
Five of the six who specified the next move expected another quarter-point increase in November. Four of the six who provided a forecast for the peak rate saw the tightening cycle topping out at 3.50 percent.
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