Due to Heatwave and Oil Prices... Producer Prices Rise for 9 Consecutive Months in July

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Due to the heatwave causing agricultural product prices to soar and the continued strength in oil and raw material prices, the producer price index rose for the ninth consecutive month last month. As the producer price index, a leading indicator of consumer prices, continues its upward trend, analysis suggests that inflationary pressures are also persisting.

According to the Bank of Korea on the 20th, the producer price index for July was recorded at 110.02 (2015 level 100), 0.7% higher than June's 109.22. This marks the ninth consecutive month of increase since last November.

Compared to July of last year, the increase rate reached 7.1%. Although this reflects the 'base effect' from the COVID-19 impact last year, it is the highest increase rate in 10 years and 1 month since June 2011 (7.2%).

The producer price index measures price changes of goods and services supplied by domestic producers to the domestic market, and it is reflected in consumer prices with about a one-month lag.

Looking at the month-on-month rate of change by item, prices of agricultural and livestock products both rose by 2.4%. Manufactured goods also increased by 1.0%. In particular, due to the rise in oil and raw material prices, coal and petroleum products (5.1%) and primary metal products (1.6%) saw significant increases. Service prices rose by 0.4%, led by transportation (1.0%) and food service and accommodation (0.6%).

Among detailed items, prices increased for watermelon (40.1%), spinach (76.0%), chicken (18.4%), diesel (6.3%), gasoline (8.2%), DRAM (8.7%), laptop LCDs (6.5%), hotels (10.1%), international air passengers (7.9%), and consignment sales commissions (0.6%).

Joonhyung Bae, head of the Price Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "Prices of watermelon and spinach rose due to poor harvests caused by the heatwave, and the shortage of foreign workers also seems to have influenced the rise in agricultural and livestock product prices. Manufactured goods prices are related to the strength in oil and raw material prices."

The domestic supply price index, which measures price changes including imports, also rose 1.8% month-on-month. In particular, raw material prices jumped by 8.2%.

The total output price index for July, which adds exports to domestic shipments, also rose 1.4% compared to June.

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