Will 'High Inflation' Persist This Year... Last Year's Producer Price Index Hits Highest in 10 Years (Comprehensive)

Bank of Korea Announces 'Producer Price Index for December 2021'

As the court has suspended the enforcement of the quarantine pass measures applied to stores, marts, and department stores over 3,000㎡ in Seoul, a large number of customers are crowding a major mart in Seoul on the 16th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jang Sehee] Last year, the domestic Producer Price Index (PPI) rose the most in 10 years due to increases in international oil prices and raw material costs. This has raised concerns that the production burden on companies will increase, leading to a rise in final consumer prices as well.

According to the 'December 2021 Producer Price Index' released by the Bank of Korea on the 20th, the PPI rose 6.4% year-on-year last year. This is the highest increase in 10 years since 2011 (6.7%), influenced by the rise in international oil prices and raw material costs.

Choi Jin-man, head of the Price Statistics Team at the Bank of Korea’s Economic Statistics Bureau, stated, "The rise in the PPI last year was due to the increase in international oil prices and raw material costs compared to 2020. However, the PPI growth rate in December recorded 9.0% year-on-year, which is a decrease from the previous month’s 9.8%."

The December 2021 PPI rose 9.0% compared to the same month last year, continuing an upward trend for 13 consecutive months. Compared to the previous month, it remained flat.

The Bank of Korea explained that this was due to increases in agricultural, forestry, and fishery products, as well as electricity, gas, water, and waste. Agricultural, forestry, and fishery products rose 2.6% month-on-month, driven by increases in agricultural products (5.2%) and fishery products (1.8%). Electricity, gas, water, and waste rose 1.6% month-on-month, led by gas, steam, and hot water (5.2%). However, coal and petroleum products and chemical products fell by 6.7% and 0.6%, respectively.

The Domestic Supply Price Index, which measures price changes at the production stage, was flat month-on-month in December but recorded a high annual increase. Intermediate goods fell by 0.1% in December, while final goods remained unchanged from the previous month. The Domestic Supply Price Index rose 8.6% year-on-year last year, marking the highest increase in 13 years since 2008’s 18.1% rise.

The Total Output Price Index, which reflects overall price changes of domestically produced goods including exports, fell 0.2% month-on-month in December but rose 12.6% year-on-year.

The decline was mainly due to manufactured goods (-0.7%). However, for the year 2021, the Total Output Price Index rose 8.0% year-on-year, reversing a decline after two consecutive years.

Meanwhile, the rise in producer prices is expected to partially pass through to consumer prices.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "With the gradual return to normal life (With COVID-19), demand-driven inflationary pressures are expected to increase. Prices, including those for personal services, will rise and remain strong through the end of the year."

In this regard, on the 14th, Bank of Korea Governor Lee Ju-yeol said at a press conference following the monetary policy direction announcement, "Inflationary pressures are spreading widely. Considering the rise in international oil prices, supply bottlenecks, and core inflation trends, we expect inflation to remain in the 3% range for the time being." He also forecasted that the annual inflation rate would exceed the mid-2% range.

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