Producer Prices Fall to '0% Range'... "Downward Pressure on Consumer Prices"

Producer Prices in May Rise 0.6% Year-on-Year
Fall for Two Consecutive Months Following April Compared to Previous Month

The producer price inflation rate has fallen to the 0% range for the first time in 2 years and 4 months.

According to the Bank of Korea on the 21st, the producer price index last month rose by 0.6% compared to the same month of the previous year. After recording a 10% increase in June last year, the rate of increase has been slowing for 11 consecutive months.

It is the first time in 2 years and 4 months since January 2021 (0.9%) that the producer price inflation rate has dropped to the 0% range compared to the same month of the previous year. The producer price inflation rate has clearly slowed down this year, with 5.1% in January, 4.8% in February, 3.3% in March, 1.6% in April, and 0.6% in May.

The Bank of Korea explained, "This is due to the base effect of international oil prices, which has expanded the decline in prices of manufactured goods."

The month-on-month change rate of producer prices also fell by 0.3% last month, continuing the decline for two consecutive months. The decline was larger compared to April (-0.1%).

Looking at the recent trend of producer prices, agricultural, forestry, and fishery products rose by 1.5% month-on-month, with livestock products (3.1%), fishery products (1.2%), and agricultural products (0.3%) all increasing.

However, manufactured goods fell by 0.8% month-on-month, with coal and petroleum products (-6.3%), chemical products (-1.1%), and primary metal products (-0.8%) all declining.

Electricity prices rose by 3.1%, and restaurant and accommodation services also increased by 0.3%, while transportation services fell by 0.3%.

Seo Jeong-seok, head of the price statistics team at the Bank of Korea, explained, "Since the producer price index has fallen for two consecutive months on a month-on-month basis, it is likely to act as a downward factor for consumer prices with a time lag in the future."

Regarding the outlook for producer prices in June, Seo said, "In June, a reduction in industrial city gas prices is expected due to the decline in liquefied natural gas (LNG) prices, while the carryover effect of electricity and gas price increases, as well as rebounds in prices of agricultural products, energy, and non-ferrous metals, are expected. Since there are both upward and downward factors, we need to observe further."

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