Due to falling international oil prices, producer prices in South Korea decreased for the first time in 11 months last month. While agricultural prices rose due to a heat wave and poor harvests, significant drops in petroleum products and electricity rates contributed to the overall decline in prices.
According to the Bank of Korea's preliminary Producer Price Index for July, the index stood at 129.39, a 0.4% decrease from the previous month. This marks the first decline in producer prices since September of last year.
By category, industrial goods fell by 0.3% compared to the previous month, influenced by lower international oil prices. Coal and petroleum products dropped by 5.1%, while chemical products decreased by 1.3%.
Electricity, gas, water, and waste management services saw a 0.6% decline from the previous month, largely due to a reduction in residential electricity rates by 11.8% as a result of eased summer billing tiers.
Conversely, agricultural, forestry, and fishery products rose by 1.5% from the previous month, driven by a 2.4% increase in agricultural prices due to the heat wave and poor harvests. The service sector also experienced a 0.4% decline, with financial and insurance services dropping by 7.1%.
Notably, spinach prices skyrocketed by 115.8% compared to the previous month. Other items that saw price increases included certain fish (15.5%), DRAM chips (8.4%), and beef (3.2%). In contrast, gasoline prices fell by 11.3%, diesel by 9.8%, polyethylene resin by 10.2%, and silver bullion by 14.0%.
Including imports, the domestic supply price index decreased by 1.8% from the previous month. Raw material prices fell by 7.7%, while intermediate and final goods dropped by 1.7% and 0.2%, respectively. Among final goods, capital goods decreased by 0.5%, and consumer goods fell by 0.9%.
The total output price index, which includes domestic shipments and exports, also declined by 0.2% from the previous month. While export prices for agricultural, forestry, and fishery products fell by 0.7%, domestic shipment prices rose by 1.5%, resulting in an overall increase of 1.4%. Industrial goods saw a 0.3% rise in export prices, but domestic shipment prices fell by 0.5%, leading to a 0.2% decrease overall.
However, in August, international oil prices and city gas rates may exert upward pressure on producer prices.
Lee Heung-hoo, head of the Bank of Korea's price statistics team, stated, "International oil prices, increases in wholesale prices of industrial gas, and instability in the Middle East are likely to exert upward pressure on producer prices in August. Additionally, the base effect from some companies' communication fee discounts last August may raise the year-on-year producer price increase rate by about 0.2 percentage points."
* This article has been translated by AI.
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