Producer Prices Rise for Three Consecutive Months... Impact of Rising International Oil Prices

Impact of Increased Demand During Chuseok
Rising Upward Pressure on Future Prices Due to Volatility in International Oil Prices

Producer prices have risen for three consecutive months due to the upward trend in international oil prices.

According to the Bank of Korea on the 24th, the producer price index for September increased by 0.4% compared to the previous month. Producer prices measure the price changes of goods and services supplied by domestic producers to the market and are used as indicators for economic trend assessments.

Producer prices had fallen consecutively in April (-0.1%), May (-0.4%), and June (-0.2%), then rebounded by 0.3% in July after four months, and rose by the largest margin in 1 year and 4 months (0.9%) in August.

Producer prices also increased by 1.3% year-on-year, marking a rise for two consecutive months.

Specifically, agricultural, forestry, and fishery products rose by 0.2% month-on-month, with agricultural products falling by 1.5% but livestock products increasing by 3.5%.

By item, beef (12.4%) and pork (6.0%) saw significant price increases. Yuseong Wook, head of the Bank of Korea's price statistics team, explained, "The increase in Chuseok gift value limits under the Improper Solicitation and Graft Act in August boosted demand, and the resumption of group meals with the start of school in September increased demand for beef and pork, influencing the price rise."

Manufactured goods fell by 0.2% in primary metal products but rose by 6.6% in coal and petroleum products and 1.5% in chemical products, resulting in an overall 0.8% increase month-on-month.

The decision to extend production cuts by Saudi Arabia and Russia last month, which kept international oil prices soaring, is interpreted as a factor contributing to the price increase.

Meanwhile, services such as restaurant and accommodation services (-0.4%) and transportation services (-0.3%) declined, leading to a 0.1% decrease month-on-month.

Electricity, gas, water, and waste services rose by 0.8% month-on-month due to an increase in residential electricity (14.6%) following the end of the summer progressive rate relief period. The rise in residential electricity was the largest in one year since September last year (17.7%).

The domestic supply price index, which measures price changes including imported goods, increased by 0.8% month-on-month. This was influenced by price increases in raw materials (3.7%), intermediate goods (0.7%), and final goods (0.3%).

The total output price index, which adds exports to domestic shipments, also rose by 0.7% month-on-month. Although services (-0.1%) declined, manufactured goods (1.2%), electricity, gas, water, and waste (0.8%), and agricultural, forestry, and fishery products (0.1%) increased.

Since producer prices affect consumer prices with a time lag, they may become a factor in future consumer price increases.

The volatility of international oil prices is expected to increase further due to the war between Israel and the Palestinian armed group Hamas, raising concerns about upward pressure on prices.

However, Team Leader Yu stated, "Oil prices rose immediately after the outbreak of the war but have recently fluctuated and are currently maintaining levels similar to the previous month. The future trend remains to be seen."

On the 10th, at a gas station in Seoul where domestic gasoline prices have been rising for 13 consecutive weeks, gasoline is being sold at 2,195 won per liter and diesel at 2,189 won per liter. Photo by Kang Jin-hyung aymsdream@