Producer prices fall for first time in 11 months

The July Producer Price Index, compiled by the Korea Bank, dropped to 129.39, marking a 0.4% decline from the previous month. This is the first decrease in 11 months. Producer price indexes surged by 2.7% in April due to the impact of the Middle East war, followed by a 1.0% increase in May, and then a decline, returning to a downward trend.

Compared to the same period last year, the increase remains at 7.7%. The increase compared to the same period last year is 3.4%, 4.1% in March, 7.2% in April, 8.6% in May, and 8.5% in June. The recent decrease in producer prices is attributed to the decline in international oil prices, which include declines in gasoline and petroleum product prices by 5.1%, and a 1.3% decline in the price index for chemicals such as polyethylene resin and jalene.

Overall, agricultural products increased by 2.4%, resulting in a 1.5% rise in agricultural and forestry products compared to the previous month. The domestic supply price (including domestic exports and imports) showed a 1.8% decline in July. All categories, including intermediate goods (-1.7%), raw materials (-7.7%), and final goods (-0.2%), declined due to lower import prices.

International oil prices and the US dollar exchange rate are cited as the main factors. The total output price, including exports, also declined by 0.2% compared to the previous month, mainly due to declines in chemical products (-0.2%) and service price indexes (-0.4%). Producer price declines may continue into August, according to Hong Ik-ho, head of the Bank's price statistics team, who noted that international oil price increases could put pressure on producer prices in the coming months.

Additionally, the base effect from last year's communication fee reduction may result in higher producer prices compared to the same month last year.