Producer Prices Rise for 2 Consecutive Months in January... Squid Up 14.1%, Piman Up 114.5%

Bank of Korea, January 2020 Producer Price Index
Up 0.2% Month-on-Month, Up 1.0% Year-on-Year

Largest Year-on-Year Increase in 14 Months
"Cannot Confirm Trend Increase Due to Lack of COVID-19 Impact Reflection"

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Last month, the Producer Price Index (PPI) showed an upward trend for two consecutive months. The year-on-year increase was the largest in 14 months. However, it is still difficult to say that the impact of the novel coronavirus disease (COVID-19) has been fully reflected, so it is premature to conclude that the producer prices have entered a sustained upward trend.

According to the 'January 2020 Producer Price Index' released by the Bank of Korea on the 20th, the PPI for January was recorded at 103.93, rising 0.2% from the previous month and 1.0% year-on-year. This marks two consecutive months of increase, with the year-on-year rise being the largest since November 2018 (1.5%). The PPI had increased by 0.1% year-on-year in June last year, then declined for five consecutive months before rising again in December and January.

The primary reason for the rise in producer prices in January was the increase in prices of agricultural, forestry, and fishery products. As temperatures dropped, the price of bell peppers surged 114.5% month-on-month, and green chili peppers rose 104.6%. The price of radish jumped 184.5% year-on-year. With demand increasing during the Lunar New Year holiday, the price of flatfish rose 23.7% month-on-month, and frozen squid prices soared 14.1% month-on-month and 42.3% year-on-year due to a sharp decline in squid catches in the East Sea.

However, concerns over African Swine Fever (ASF) led to a sharp drop in demand for livestock products, causing pork prices to fall 8.6% month-on-month and 7.1% year-on-year. Chicken prices also decreased by 10.4% year-on-year. Kang Hwan-gu, head of the Price Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Despite supply and inventory levels remaining steady, pork prices declined due to the impact of ASF."

In manufactured goods, prices of coal and petroleum products, as well as primary metal products, declined, resulting in a 0.1% decrease month-on-month. However, year-on-year, prices rose by 0.2%. Semiconductor prices continued to fall, though the rate of decline has slowed. DRAM prices dropped 2.5% month-on-month and 41.3% year-on-year.

The 2.9% increase in the minimum wage from the new year was reflected in some service sectors. Prices in the building cleaning sector rose 2.7% month-on-month, and software development supply increased 2.6% due to average wage increases for technicians. The overall service sector price index rose 0.3% month-on-month.

Meanwhile, the Domestic Supply Price Index for January, which adds import prices to the PPI, rose 0.2% month-on-month and 1.2% year-on-year, driven mainly by raw materials (1.5%). The Total Output Price Index, which adds export prices to the PPI, fell 0.1% month-on-month, mainly due to a 0.6% decline in manufactured goods.

Team leader Kang said, "Typically, when the PPI shows a year-on-year increase of around 1.0%, it can be judged that an upward trend has begun. However, in this case, there is uncertainty due to COVID-19," adding, "Until the February PPI, which will clearly reflect the impact of COVID-19, is released, it is difficult to be confident that prices have entered an upward trend."

This content was produced with the assistance of AI translation services.