Due to Steep Inflation... 61% of Companies Respond with Price Increases

Producer Prices Rise Due to Ukraine Crisis
Average Wages Increase 2-5%... Employment Adjustments Also Made

(Data provided by Bank of Korea)

Steep inflation has led to a series of price increases for products and services among domestic companies. Most companies expect the inflation trend to continue in the second half of this year, and a significant number of them responded that they would respond to inflation by 'raising prices.'

According to the Bank of Korea's regional economic report released on the 27th, titled 'The Impact of Recent Inflation on Companies,' 69% of all companies raised the prices of their products and services due to rising raw material costs.

To examine the impact of recent inflation on companies, the Bank of Korea conducted a survey of 570 companies nationwide from the 12th of last month to the 2nd of this month.

All companies that responded to the survey reported an increase in raw material prices. Among them, 60% said the increase was 'less than 20%' compared to last year, while 40% reported an increase of '20% or more.'

Among companies that have not recently raised their selling prices, 53% said they plan to increase prices within this year. In particular, 89% of companies in the construction industry planned to raise prices. The proportion of companies that responded they would increase prices by '20% or more' also reached 67%.

A significant number of companies explained that the Ukraine crisis, which broke out in February, had a major impact on 'rising raw material prices (67%)' and 'increased logistics costs (36%).' More than half expect the Ukraine crisis to continue 'until the end of this year (60%),' but a considerable number of companies also foresee it lasting 'beyond next year (41%).'

Due to lockdowns in some cities caused by China's 'Zero-COVID' policy, companies generally experienced 'delays in exports and imports (40%),' 'rising raw material prices (36%),' and 'increased logistics costs (24%).' Additionally, 27% of companies reported having experienced production stoppages due to the lockdowns.

As a result of inflation, average wages were found to have increased by 2-5% compared to last year. Among companies with wage increases below 2%, 73% plan to raise wages next year.

The majority of companies (86%) expect prices to continue rising in the second half of this year.

Regarding future inflation, the most common response was to respond with 'price increases (61%).' However, in the service industry, responses indicating 'price increases (45%)' and 'employment adjustments (32%)' were both high.