July Producer Prices Hit Record High, Spinach Up 76%... Chuseok Feast Costs Cause Concern (Comprehensive)

July Producer Prices Rise 0.6% Month-on-Month and 7.1% Year-on-Year
Inflation Pressure Continues Ahead of Chuseok Due to Heatwave and Oil Price Increase

Government to Announce Chuseok Livelihood Stabilization Measures by the End of This Month

[Asia Economy Reporters Eunbyeol Kim, Chaeseok Moon in Sejong] With the Chuseok holiday just a month away, prices are soaring due to the prolonged heatwave this summer and the sharp rise in oil and raw material prices. Producer prices have hit record highs, and the consumer price inflation rate has remained in the 2% range for four consecutive months. In particular, prices of agricultural and livestock products and petroleum products, which are closely related to the livelihoods of ordinary people, are rising. While the government is making all-out efforts to stabilize prices, some items have seen price control, but the overall inflation trend has not been curbed. Since various price indicators, including producer prices, which are leading indicators of consumer prices, continue to rise, inflationary pressures are expected to persist, and the annual inflation rate this year is predicted to exceed 2% for the first time since 2012.

According to the 'Producer Price Index for July 2021' released by the Bank of Korea on the 20th, the producer price index for July was 110.02 (2015=100), up 0.7% from June (109.22). This marks the ninth consecutive month of increase since November last year. Compared to July 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 over 10 years 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 is reflected in consumer prices with about a one-month lag.

Looking at the month-on-month changes by item, prices of agricultural and livestock products rose by 2.4% each. Prices of manufactured goods also rose 1.0%, mainly driven by coal and petroleum products (5.1%) and primary metal products (1.6%). Among major items, producer prices for watermelon increased by 40.1%, spinach by 76.0%, and chicken by 18.4% compared to the previous month. Among manufactured goods, prices of diesel (6.3%), gasoline (8.2%), and DRAM (8.7%) showed notable increases.

Joonhyung Bae, head of the Price Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "There was an impact from poor crop yields due to the heatwave, and furthermore, some agricultural products suffered from poor cultivation due to a shortage of foreign workers." Prices of agricultural and livestock products that consumers actually feel at supermarkets are also rising. According to the Korea Agro-Fisheries & Food Trade Corporation (aT) Agricultural Product Distribution Information site (KAMIS), the price of spinach this month is about 23,419 KRW per kilogram, more than 1.5 times higher than the same month last year (14,794 KRW). The price of one watermelon also rose by more than 20% to 24,826 KRW. The retail price of gasoline at gas stations in the second week of August was 1,647.3 KRW per liter, marking the 15th consecutive week of increase. Overall prices at hotels and restaurants, as well as transportation costs, also rose. According to the Bank of Korea, the producer price index for restaurant and accommodation services in July was 114.89, up 2.6% year-on-year. Hotel prices rose 10.1% month-on-month, and international air passenger fares increased by 7.9%.

Lee Eok-won, First Vice Minister of the Ministry of Economy and Finance, is speaking at the '28th Innovation Growth Strategy Review Meeting, COVID-19 Policy Review Meeting, and 23rd Price-Related Vice Ministers' Meeting' held at the Government Seoul Office Building on the 20th.
[Photo by Yonhap News]

As prices continue to rise, the government plans to announce Chuseok livelihood stabilization measures by the end of this month. Deputy Minister of Strategy and Finance, Eokwon Lee, chaired the 'Innovation Growth Strategy Review Meeting and Price Vice-Ministerial Meeting' at the Government Seoul Office and stated, "We are preparing Chuseok livelihood stabilization measures with related ministries and agencies to support vulnerable groups and ease the burden of living costs," adding, "We plan to announce them as early as the end of this month." To expand supply during the Chuseok peak season, the government has secured stockpiles and contract quantities of apples, pears, and radishes. Deputy Minister Lee added, "We plan to complete securing stockpiles of napa cabbage within this week," and "We will monitor prices of agricultural, livestock, and fishery products weekly until the Chuseok peak season and immediately prepare supplementary measures if necessary." According to the Ministry of Strategy and Finance, thanks to government management, egg prices have remained in the 6,000 KRW range since the 12th, and prices of Chuseok peak season items such as apples, pears, and radishes are also falling.

Comparing prices on the 12th and 19th, napa cabbage fell from 4,536 KRW to 4,478 KRW per head, radish from 2,306 KRW to 2,257 KRW, and apples from 31,580 KRW to 30,667 KRW. In particular, egg prices dropped to 6,946 KRW per tray (30 eggs) on the 12th and have remained in the 6,000 KRW range. On the 19th, the price further decreased to 6,826 KRW.

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