Producer Prices Hit Another Record High Amid Soaring Raw Material Costs

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[Asia Economy Reporter Seo So-jeong] The producer price index, a leading indicator of consumer prices, has once again recorded an all-time high. This is due to a sharp rise in raw material prices such as international oil prices, increasing the likelihood that the consumer price index for April will remain in the 4% range.

According to the Bank of Korea on the 21st, the provisional producer price index for March stood at 116.46 (2015 = 100), up 1.3% from the previous month (114.95). This marks the third consecutive month of increase. The previous all-time high recorded in February was surpassed within a month.

The producer price index measures price changes of goods and services supplied by domestic producers to the market and is used as an economic trend indicator. The producer price index rose for 13 consecutive months until November last year, remained unchanged in December, and has been rising again since January this year.

Looking at the rate of change by sector, manufactured goods, which have the largest weight in the index calculation, rose the most at 2.3% compared to the previous month. Among manufactured goods, coal and petroleum products (15.6%) recorded the highest increase in 1 year and 9 months since June 2020 (21.3%), and chemical products (2.8%) recorded the highest increase in 11 months since April 2021 (3.4%). The coal and petroleum products index (194.75) and the chemical products index (121.21) themselves are all-time highs.

Agricultural, forestry, and fishery products rose 0.2% due to an increase in livestock products, and manufactured goods such as coal and petroleum products and chemical products rose 2.3% due to rising raw material prices including international oil prices. Electricity, gas, water, and waste increased by 0.2%, and services rose 0.3% as restaurant and accommodation services increased.

The domestic supply price index, which measures price changes of goods and services supplied domestically, also rose for three consecutive months. Raw materials (8.0%) and intermediate goods (2.0%) increased, resulting in a 2.3% rise compared to the previous month. Compared to the same month last year, it rose 13.7%, continuing an upward trend for 14 consecutive months.

The total output price index, which measures price changes of goods and services based on total production including domestic shipments and exports, also rose 2.2% compared to the previous month due to increases in manufactured goods (3.4%) and others. Compared to the same month last year, it rose 12.0%.

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