Producer Price Index Hits Highest Growth in 28 Years... Consumer Price Pressure Mounts

Producer Price Index Up 2.5% in April from Previous Month
Highest Growth Since February 1998
Raw Material Supply Disruptions from Middle East War
Sharp Increases in Coal, Petroleum, and Chemical Product Prices
Eight Consecutive Months of Growth and Widening Gains
Upward Pressure on Consumer Prices

Last month, the Producer Price Index (PPI) jumped by 2.5% compared to the previous month, marking the highest growth rate since February 1998. As the war in the Middle East continues, ongoing disruptions in raw material supply have led to price increases in coal and petroleum products, chemical products, and even air transport, resulting in this upward trend. With the PPI rising for eight consecutive months and the increase in April significantly outpacing that of March, pressure on consumer price inflation is mounting.

Producer Price Index Records Highest Growth in 28 Years and 2 Months

According to the "Provisional Producer Price Index for April 2026" released by the Bank of Korea on the 21st, last month’s PPI stood at 128.43 (2020=100), up 2.5% from the previous month. This is the first time the PPI has increased by as much as 2.5% month-on-month since February 1998 (2.5%), a span of 28 years and 2 months. The PPI has now risen for eight consecutive months since September of last year. Compared to the same month last year, the PPI jumped by 6.9%, the highest rate since October 2022 (7.3%).

By category, manufactured goods surged significantly for the second consecutive month. Due to raw material supply disruptions from the ongoing Middle East war, coal and petroleum products (31.9%) and chemical products (6.3%) increased, resulting in a 4.4% rise from the previous month. Notably, coal and petroleum products soared by 31.9% month-on-month. Although the rate of increase narrowed slightly from the previous month’s 32.0%, the growth remains high. Year-on-year, prices jumped 73.9%, the highest level in 3 years and 10 months since the 83.3% rise in June 2022. Among individual items, solvent (94.8%), diesel (20.7%), polyethylene resin (33.3%), and polypropylene resin (32.0%) all saw significant increases.

Lee Munhee, Head of Price Statistics Team 1 at the Bank of Korea’s Economic Statistics Department, explained, "In March, prices of petroleum products such as gasoline and diesel, as well as naphtha, rose sharply. In April, the increase in naphtha prices slowed, but the upward trend in gasoline, diesel, and kerosene continued, and jet fuel prices jumped, keeping the overall growth rate of coal and petroleum products at a level similar to March." She added, "The increase in prices for gasoline and diesel was not fully reflected in March due to the government’s maximum price policy for petroleum products, so some of the international price increases were carried over and reflected in April. Since different items posted sharp increases in March and April, the overall growth rate was similar to that of March."

In addition to manufactured goods, prices also rose for electricity, gas, water & waste, and services. Electricity, gas, water & waste increased by 0.3% from the previous month, mainly due to a 3.9% rise in industrial city gas. Services rose by 0.8% month-on-month, with transportation services (1.6%) increasing mainly due to air transportation, and financial and insurance services (3.0%) rising as brokerage commissions jumped by 8.1%, following the increase in stock prices. Brokerage commissions recorded the highest growth since February (14.8%). On a year-on-year basis, brokerage commissions rose 119%, the highest rate in 26 years and 6 months since the 137.9% increase in October 1999. In contrast, the prices of agricultural, forestry and fishery products fell by 1.0% month-on-month, as agricultural products (-4.0%) and fishery products (-3.2%) declined.

Upward Pressure Continues in May... Consumer Price Pressure Intensifies

There is analysis that it is still difficult to predict the trend of the Producer Price Index for this month. From the beginning of the month through May 19, the average daily international oil price and the won-dollar exchange rate have fallen somewhat compared to the monthly average for the previous month. However, as the impact of raw material supply disruptions from the Middle East war spreads to various sectors with a time lag, it is expected to continue exerting upward pressure on the Producer Price Index. Lee noted, "In May, the prices of industrial city gas and domestic air passenger fares are expected to rise. The combined impact of falling oil prices or exchange rates and the delayed effect of rising raw material prices is likely to have a complex effect going forward."

The Producer Price Index measures price fluctuations in goods and services supplied by producers to the market and is typically reflected in consumer prices with a lag of about one to three months, depending on the item. Lee explained, "As the Middle East war continues, the impact of raw material supply disruptions and rising raw material prices will spread to various sectors with a time lag, putting upward pressure on the Producer Price Index, which in turn will exert upward pressure on consumer prices." However, she pointed out that the extent and timing of the pass-through from raw material or intermediate goods prices to consumer prices is highly uncertain, as it is also affected by market demand, business conditions, and government policy, in addition to cost increases. She added, "Since the prices reflected in consumer prices are those sold directly to consumers after passing through distribution channels, the degree of fluctuation may differ from the Producer Price Index due to discounts and other factors in the distribution process."

Meanwhile, the Domestic Supply Price Index, which measures price changes in goods and services supplied domestically (including domestic shipments and imports), rose by 5.2% from the previous month, led by intermediate goods (4.3%) and raw materials (28.5%). The price of raw materials rose mainly due to imports, as the surge in international oil prices in March was reflected in import prices for April on a customs clearance basis with a time lag. Year-on-year, the Domestic Supply Price Index increased by 9.9%. The Total Output Price Index, which measures price changes in goods and services including exports as well as domestic shipments, rose by 3.9% month-on-month, led by manufactured goods (5.8%). Compared to the same month last year, it jumped by 13.8%.

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