Producer Prices in October Down 0.1%... Agricultural and Livestock Product Prices Fall, Declining for the First Time in Four Months

Prices Fall as Agricultural Harvest Season Arrives
Holiday Demand Disappears and Livestock Disease Worsens, Causing Livestock Product Prices to Drop
"Future Oil Prices Are a Variable... Need to Monitor Trends"

Last month, the producer price index fell for the first time in four months as prices of agricultural and livestock products dropped.

According to the Bank of Korea on the 21st, the producer price index for October (121.59) decreased by 0.1% compared to the previous month.

Yoo Seong-wook, head of the price statistics team at the Bank of Korea, said, "Although prices of manufactured goods, electricity, gas, water, waste, and services rose slightly due to increased material costs and rising production costs, the prices of agricultural, forestry, and fishery products fell as production increased and demand decreased with the arrival of the harvest season."

The producer price growth rate rebounded by 0.3% in July after four months, then rose by the largest margin in 16 months (0.9%) in August, and increased by 0.4% in September.

Compared to October 2022, a year earlier, last month’s producer price index rose by 0.8%, marking a continuous increase for three consecutive months.

Specifically, agricultural, forestry, and fishery products fell by 5.5% month-on-month as agricultural products (-5.9%) and livestock products (-6.0%) declined despite a 1.3% increase in fishery products.

By item, agricultural products saw large drops in spinach (-73.3%) and napa cabbage (-23.5%), while livestock products experienced significant declines in beef (-13.6%) and pork (-6.6%). Yoo explained, "Beef decreased due to the impact of Lumpy Skin Disease that broke out around mid-October, and pork prices fell due to a base effect as production increased but demand disappeared after the holiday season."

Manufactured goods fell by 0.1% month-on-month as coal and petroleum products (-1.4%) declined due to a drop in international oil prices, but computer, electronic, and optical equipment (0.8%) rose due to semiconductor price increases, and chemical products (0.3%) increased due to reduced supply from production facility maintenance.

In addition, services rebounded by 0.1% month-on-month with transportation services (0.5%) and restaurant and accommodation services (0.3%) increasing. Yoo explained, "Transportation service costs rose due to fare hikes in public transportation such as subways and city buses in Seoul and Busan, and prices for restaurants and accommodations also increased due to the designation of temporary holidays for National Foundation Day and the extended Hangeul Day holiday."

Electricity, gas, water, and waste rose by 0.4% month-on-month as industrial city gas (3.7%) increased due to the fuel cost linkage system.

The domestic supply price index, which measures price changes including imports, rose by 0.7% month-on-month. Although final goods stabilized, raw materials (3.6%) and intermediate goods (0.6%) increased. Compared to the same month last year, it fell by 2.1%.

Furthermore, the total output price index, which adds exports to domestic shipments, rose by 0.2% month-on-month. This was because agricultural, forestry, and fishery products (-5.4%) declined, but manufactured goods (0.6%) and services (0.1%) increased.

It is uncertain whether the downward trend in producer prices will continue. The recent widening fluctuations in international oil prices are increasing uncertainty. International oil prices, which fell last week due to concerns over reduced crude oil demand, have started rising again as the possibility of an extension of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) Plus has increased.

Regarding future prospects, Yoo said, "Oil prices have a significant influence, but they are still maintaining a level lower than the previous month in practical terms. We will have to observe future trends to know for sure."

[Image source=Yonhap News]