Electricity Price Hike Impact... Producer Price Index Rebounds After 3 Months

Electricity Rates Rise 10.9%... Largest Increase Since 1980

An electric meter installed in an officetel in downtown Seoul.
[Image source=Yonhap News]

Due to increases in electricity and other public utility charges, the producer price index (PPI) in January returned to an upward trend after three months.

According to the Bank of Korea on the 23rd, last month’s producer prices rose 0.4% month-on-month due to hikes in electricity rates and service prices.

The producer price index rose 0.5% in October last year but fell for two consecutive months in November (-0.3%) and December (-0.4%), before showing an upward trend again in January.

Compared to the same month last year, it also increased by 5.1%. However, the rate of increase continued to slow for the seventh consecutive month.

The rise in the January producer price index was largely influenced by the increase in public utility charges.

Electricity prices rose by 10.9%, which the Bank of Korea explained as "the highest level since a 37.1% increase in February 1980."

Electricity, gas, water, and waste services rose 4.0% month-on-month, marking the highest increase in three months since October last year (8.1%).

In addition, service charges rose 0.5% month-on-month, mainly driven by information and communication and broadcasting services (1.0%), and restaurant and accommodation services (0.5%).

For agricultural, forestry, and fishery products, livestock products fell by 5.8%, but agricultural products (4.9%) and fishery products (0.4%) rose, resulting in a 0.6% increase month-on-month.

Manufactured goods saw a 0.1% decline as food and beverages (0.7%) and chemical products (0.1%) rose, but coal and petroleum products fell by 3.1%.

Last month, the domestic supply price index fell 1.0% month-on-month but rose 4.8% compared to the same month last year.

The domestic supply price index measures price changes of goods and services supplied domestically to understand the transmission process of price fluctuations.

Final goods rose 0.1%, while raw materials (-8.1%) and intermediate goods (-0.4%) declined.

With the producer price index rising again due to the impact of public utility charge increases, concerns over inflation are expected to grow.

Bank of Korea Governor Lee Chang-yong responded on the 21st during a report to the National Assembly’s Planning and Finance Committee to concerns that increases in electricity and gas rates could negatively affect price stability, stating, "Public utility charges act as a factor preventing prices from falling."

However, Governor Lee added, "From the perspective of the entire national economy, it is unavoidable to raise energy prices such as electricity, water, and gas," and said, "If energy prices do not rise, the current account deficit could worsen, which would negatively affect inflation through exchange rate impacts."

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