Producer Prices Drop to 1% Range... Lowest in 2 Years and 3 Months

The Bank of Korea Announces Producer Price Index for April

The producer price inflation rate fell to the 1% range, marking the lowest level in 2 years and 3 months. This was influenced by a relatively stable international oil price and significant declines in agricultural products and industrial city gas prices. As the inflationary pressure eases, the Bank of Korea's additional tightening burden is also expected to decrease.

According to the Bank of Korea on the 25th, the Producer Price Index last month rose by 1.6% compared to the same month last year. Since recording a 10% increase in June last year, the rate has been slowing for 10 consecutive months.

This is the first time in 2 years and 3 months since January 2021 (0.9%) that the producer price inflation rate has fallen below the 1% range compared to the same month last year. This year, the rate has clearly decelerated with 5.1% in January, 4.8% in February, 3.3% in March, and 1.6% in April.

The Bank of Korea explained, "This is due to the base effect from last year's sharp rise in oil prices, which led to a decline in manufactured goods prices."

The month-on-month producer price inflation rate also fell by 0.1% in April, turning negative for the first time in 4 months.

Looking at the recent producer price trends, agricultural, forestry, and fishery products rose by 2.3% in seafood but fell by 5.5% in agricultural products, resulting in a 1.8% decrease compared to the previous month.

Manufactured goods saw a 0.6% decline in computers, electronics, and optical equipment, but primary metal products rose by 0.6%, leading to an overall 0.2% increase. Electricity, gas, water, and waste services fell by 2.8%, mainly due to a significant 20.8% drop in industrial city gas prices.

Services increased by 0.3%, with restaurant and accommodation services and financial and insurance services both rising by 0.8%.

Seo Jeong-seok, head of the Bank of Korea's price statistics team, explained, "Industrial city gas prices are linked monthly to international energy price fluctuations. After a significant rise, recent energy price declines are now reflected in falling prices."

He added, "The sharp drop in agricultural product prices is due to a significant increase in the shipment volumes of onions and green chili peppers."

Regarding whether the producer price inflation will continue to slow in May, Seo said, "We need to observe the movements of international oil prices and exchange rates, which remain uncertain. However, recent key variables show that while the exchange rate rose by 0.9% compared to the previous month, Dubai crude oil prices fell by 10.4%."

Citizens shopping at Seoul Hanaro Mart Yangjae Branch. Photo by Jinhyung Kang aymsdream@

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