Producer Prices Rising All Year Round... Also Driving Up Consumer Prices (Comprehensive)

Biggest Increase in 13 Years
7 Consecutive Months of 'All-Time High' Records
One Month Lag Behind Consumer Prices

[Asia Economy Reporter Jang Sehee] Producer prices, which refer to the prices of products supplied to the market, have risen throughout the year. In particular, producer prices last month increased the most in 13 years. The pressure to raise consumer prices has also intensified.

According to the Bank of Korea on the 19th, the Producer Price Index for October was 112.21 (2015 level 100), up 0.8% from September (111.27). This marks the 12th consecutive month of increase and the highest record for seven months since April. Compared to the same month last year, it rose 8.9%, the highest since October 2008. The Producer Price Index measures price changes of goods and services supplied by domestic producers to the domestic market.

Choi Jinman, head of the Price Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "The prices of coal and petroleum products rose sharply due to increases in international oil prices and raw material costs," adding, "The recovery in demand compared to last year also had an impact."

By category, prices of manufactured goods rose 1.8%. Among manufactured goods, coal and petroleum products saw the highest increase at 12.6%, while primary metal products and chemical products rose 2.5% and 1.7%, respectively. Prices in the electricity, gas, water, and waste sectors also increased by 2.3%. On the other hand, prices of agricultural, forestry, and fishery products fell by 4.3%, with livestock and agricultural products dropping 5.5% and 4.3%, respectively.

Detailed items such as ethylene dichloride (21.1%), diesel (17.4%), aluminum chassis bar (16.4%), hotels (2.0%), and wired telephone services (2.2%) saw price increases. Conversely, prices of napa cabbage (47.9%), pork (14.9%), beef (7.1%), domestic air passengers (8.2%), and real estate brokerage (4.0%) decreased.

Producer prices typically lead consumer prices by about one month. Accordingly, consumer prices are also expected to rise.

There is speculation that the Bank of Korea will raise interest rates and revise upward its inflation forecast at the Monetary Policy Committee meeting on the 25th.

The Bank of Korea expects inflation to rise 2.1% this year. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "Overall price pressures are becoming very intense," adding, "If supply-side factors such as global supply chains are difficult to manage, it is necessary to control demand-side inflation through liquidity withdrawal."

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