Producer Price Index Hits Record High in May... 7 Consecutive Months of Increase

Producer Price Index Hits Highest Since 1965 Statistics Compilation
Impact of Rising International Oil and Raw Material Prices... June Upward Trend Expected to Continue

[Asia Economy Reporter Jang Sehee] The Producer Price Index (PPI) in May reached an all-time high due to the rise in international raw material prices. This is the highest level since statistics began in 1965. The index has been rising for seven consecutive months since November last year.

According to the 'Producer Price Index for May 2021' announced by the Bank of Korea on the 22nd, the PPI last month was 108.50, up 0.4% from the previous month. Although prices of agricultural, forestry, and fishery products, which had led the price increase, declined, prices of manufactured goods affected by raw material prices rose.

The index has been on an upward trend for seven consecutive months since November last year. This is the longest continuous increase since the 19-month rise from November 2009 to May 2011. Compared to the same period last year, it rose by 6.4%.

The Producer Price Index measures price changes of goods and services supplied by domestic producers to the domestic market and has about a one-month lag compared to the Consumer Price Index. As the producer prices rose in May, consumer prices in June are also expected to increase.

Manufactured goods led the rise in producer prices. Last month, manufactured goods rose 1.0% month-on-month, continuing a 12-month consecutive increase.

By detailed item, prices of agricultural, forestry, and fishery products fell 1.2% month-on-month, but prices of coal and petroleum products (4.4%) and primary metal products (1.6%) rose, driving the increase in manufactured goods prices.

Prices for electricity, gas, water, and waste services fell 1.0% month-on-month, influenced by a decrease in city gas prices. Services, including restaurant and accommodation services, rose 0.1% month-on-month.

Prices of agricultural, forestry, and fishery products dropped 1.2% month-on-month. The Bank of Korea explained that food prices fell 0.7% and fresh food prices dropped 4.5% due to increased agricultural product shipments.

The Domestic Supply Price Index, which adds import prices to the Producer Price Index (108.92), rose 0.5% month-on-month due to increases in intermediate and final goods. Also, the Total Output Price Index, which includes export prices in the Producer Price Index (107.89), rose 0.8%.

Regarding the outlook for the Producer Price Index, a Bank of Korea official stated, "Since international oil prices and raw material prices continue to rise, the upward trend in producer prices is likely to continue in June. However, we need to observe how things will develop afterward."