Imported Prices Reach Highest in 7 Years and 7 Months... High Inflation Emergency

Rising Crude Oil and Commodity Prices... Expected Impact on Low-Income Household Prices
Experts Say "Effects on Gasoline, Diesel, Transportation Costs, and Wages"

[Asia Economy Reporter Jang Sehee] Due to the rise in international oil prices and raw material costs, the import price index in September reached its highest level in 7 years and 7 months. Oil prices continue to rise this month as well, which is expected to impact living costs ahead of the winter season.

According to the "September Export and Import Price Index" released by the Bank of Korea on the 14th, the import price index (provisional figure based on the Korean won, 2015 level 100) last month was 124.58, up 2.4% from August (121.61). The index itself is the highest since February 2014. Compared to the same month last year, it rose by 26.8%, marking the largest increase in 12 years and 10 months since November 2008.

The strength in import prices was largely influenced by oil prices. Mining products rose by 5.1%, among which crude oil increased by 5.3% compared to the previous month. The average monthly price of Dubai crude oil, which Korea imports, was $72.63 per barrel last month, up 4.5% from August. Choi Jin-man, head of the price statistics team at the Bank of Korea, explained, "Both exports and imports were significantly affected by the rise in international oil prices."

The export price index was 114.18, up 1.0% from the previous month. The upward trend has continued for 10 consecutive months since November last year (0.6%). Compared to the same month last year, it rose by 20.2%, recording the highest growth rate since February 2009 (22.9%). Coal and petroleum products (6.0%), chemical products (1.4%), and electrical equipment (1.1%) increased compared to August, while computers, electronics, and optical devices fell by 0.5%.

The rise in import prices due to increasing oil prices leads to a general increase in domestic prices. Experts analyze that the rise in oil and raw material prices will directly impact the living costs of ordinary citizens.

Professor Andonghyun of Seoul National University’s Department of Economics stated, "When raw material prices rise, companies face higher production costs," adding, "Eventually, the final consumer prices also increase." He further explained, "From a company’s perspective, prices are not raised or lowered strictly in proportion to costs, but when prices rise sharply, a significant portion inevitably gets passed on." Professor Ha Jun-kyung of Hanyang University’s Department of Economics added, "Oil prices are directly linked to gasoline and diesel prices, which are closely related to consumer prices," and "They also affect transportation costs and wages, which can amplify the impact."

Considering the trend of rising oil prices, the upward trend in export and import prices is expected to continue this month. The price of November West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange recently exceeded $80 per barrel. Team leader Choi Jin-man said, "The upward trend in raw materials and oil prices has continued since October."

As the rise in import prices persists, the annual consumer price inflation is expected to exceed the 2.1% forecast made in August. Bank of Korea Governor Lee Ju-yeol recently stated, "The impact of oil prices on domestic prices is so significant that the annual consumer price inflation rate is expected to surpass the August forecast of 2.1%," adding, "Inflation is one of the most important considerations in monetary policy management."

In particular, recent exchange rate variables are also expected to stimulate import prices. Professor And said, "If the U.S. Federal Reserve concretizes tapering, the value of the dollar will rise, which could further increase import prices." Professor Ha added, "Recently, gasoline prices in the U.S. have risen significantly, pushing inflation rates into the 5% range, and we are likely to follow a similar trend on a large scale," concluding, "Consumer prices are expected to remain above 2% for a considerable period."

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