Will Rising Oil Prices Lead to Price Recovery? Producer Prices Increase for the First Time in 5 Months

Bank of Korea 'Producer Price Index for June 2020'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Producer prices, which had been declining due to the impact of the novel coronavirus disease (COVID-19), turned positive for the first time in five months. After exiting the negative zone for four months last year and recording a flat trend, producer prices this time rose compared to the previous month.

According to the 'June 2020 Producer Price Index' announced by the Bank of Korea on the 20th, producer prices last month stood at 102.52 (2015=100), up 0.5% from the previous month (101.96). After three months of decline since January, the index exited the negative zone for the first time in four months, and this time producer prices rose month-on-month. Producer prices refer to the price changes of goods and services supplied to the market by domestic producers.

The rise in prices, mainly in manufactured goods due to the increase in international oil prices, was the factor that drove up producer prices. The price of manufactured goods rose by 1.0%, with coal and petroleum product prices increasing by 21.1% month-on-month.

Prices of agricultural, livestock, and fishery products, which had risen last month due to the government's emergency disaster relief funds, all fell, declining 1.6% compared to the previous month. Kang Hwan-gu, head of the Bank of Korea's Price Statistics Team, stated, "As the shipment volume of agricultural and livestock products increased, prices of agricultural, forestry, and fishery products generally declined. In the case of livestock products, there was also a rebound effect from the significant impact of the disaster relief funds in May."

Service prices rose 0.3% month-on-month, driven by increases in information and communication and broadcasting services, as well as financial and insurance services.

Producer prices fell 0.9% year-on-year, continuing a decline for four consecutive months. Prices of agricultural, forestry, and fishery products rose 8.4% year-on-year, but manufactured goods prices fell 3.6%. This was due to a 29.8% drop in coal and petroleum product prices following the decline in oil prices.

The Domestic Supply Price Index, which reflects prices of both domestically supplied and imported goods and services, rose 0.8% month-on-month, marking an increase for the first time in four months. However, it fell 3.9% year-on-year, continuing a decline for four consecutive months. Raw materials (6.1%), intermediate goods (0.5%), and final goods (0.3%) all increased.

The Total Output Price Index, which measures price changes of goods and services based on total output including exports as well as domestic shipments, also rose 0.4% month-on-month, rebounding for the first time in four months. However, it fell 2.2% year-on-year.

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