Producer Prices Fall on Oil Price Drop
Domestic producer prices shifted to a downward trend for the first time in 11 months, driven by a decline in international oil prices. Despite a surge in agricultural product prices caused by the heatwave, falling prices for petroleum products and electricity rates pulled down the overall price inde
For the first time in 11 months, domestic producer prices have turned downward, attributed to a drop in international oil prices. Despite an agricultural price surge caused by a heatwave, lower prices for petroleum products and electricity contributed to a decline in the overall price index. According to the Bank of Korea's August 21 report, the July producer price index was 129.39, a 0.4% decrease from June's 129.92.
After nine consecutive monthly increases from September last year to May this year, the index stayed flat in June before dropping in July.
Year-on-year growth slowed, with May at 8.6%, June at 8.5%, and July at 7.7%. Industrial products, affected by falling international oil prices, led the drop at 0.5%, followed by coal and petroleum products at 5.1% and chemical products at 1.3%. Gasoline and diesel prices fell by 11.3% and 9.8%, respectively. The electric power, gas, water, and waste sector also declined by 0.6%.
This was due to a 11.8% reduction in residential electricity rates during the summer, as policy eased the progressive brackets. The services sector dropped by 0.4% overall, with brokerage commissions falling 16.8% due to declining stock prices. However, agricultural, forestry, and marine products surged by 1.5%, with spinach prices increasing 115.8% compared to the previous month.
The Bank of Korea noted that the increase in agricultural products this year is relatively small compared to last year's 5.6% surge. The domestic supply price index, measuring domestic goods and services including imports, dropped by 1.8%. This decline was primarily due to a 7.7% drop in raw material prices and a 1.7% decrease in intermediate goods. The total output price index, which includes exports, also decreased by 0.2% due to falling industrial product prices.
It remains uncertain if the downward trend will continue into August. The Bank of Korea predicts upward price pressure as international oil prices rebounded in August. Head of the Price Statistics Team, Lee Heung-hoo, stated that international oil prices rose by about 11% from July to August, and added that the increase in wholesale rates for industrial city gas and Middle East instability are contributing factors.
Concerns also exist regarding an increase due to base effects from telecom fee discounts in August of last year.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
