Producer prices down 0.4% in July from prior month

Petroleum products, financial services both decline

Rising oil prices point to upward pressure in August

A gas station in Seoul. [Yonhap]
A gas station in Seoul. [Yonhap]

South Korea's producer prices fell for the first time in 11 months in July, dragged down by lower international oil prices and a sluggish stock market, data showed.

The producer price index stood at 129.39 (base year 2020 = 100) in July, down 0.4 percent from the previous month's 129.92, the Bank of Korea said Friday. Producer prices had risen for nine consecutive months from September last year before going flat in June, then turning negative in July for the first time in 11 months.

Compared with a year earlier, prices were still up 7.7 percent. In May and June, the index had climbed 8.6 percent year-on-year for two straight months — the fastest pace since July 2022, when it rose 9.2 percent.

By category, manufactured goods fell 0.5 percent from the previous month, as coal and petroleum products dropped 5.1 percent and chemical products declined 1.3 percent, both reflecting lower global oil prices. Electricity, gas, water and waste services slipped 0.6 percent, largely because residential electricity charges fell 11.8 percent after the government eased the progressive billing tiers applied during summer.

Services fell 0.4 percent, led by a 7.1 percent drop in financial and insurance services as brokerage commissions declined amid weak equity markets. Agricultural, forestry and fishery products, by contrast, rose 1.5 percent from the prior month, driven by a 2.4 percent gain in farm produce.

Among individual items, spinach surged 115.8 percent — the largest single-item increase — as a heat wave and poor harvests squeezed supply. Resort condominiums (31.1 percent), other fish (15.5 percent) and DRAM chips (8.4 percent) also posted sharp gains. On the downside, diesel fell 9.8 percent, gasoline dropped 11.3 percent, polyethylene resin slid 10.2 percent and xylene declined 4.9 percent.

The domestic supply price index, which measures price changes including imported goods, fell 1.8 percent from the previous month.

Raw materials (-7.7 percent), intermediate goods (-1.7 percent) and final goods (-0.2 percent) all declined, with imports leading the broad-based drop. By end use, capital goods fell 0.5 percent and consumer goods dropped 0.9 percent, while services edged up 0.4 percent.

A Bank of Korea official said the results reflected growing downward pressure on import prices, as the won strengthened against the dollar and June international oil prices — which feed into July customs import figures — also fell.

The total output price index, which adds exports to domestic shipments, also fell 0.2 percent from the prior month in July, with manufactured goods and services declining 0.2 percent and 0.4 percent, respectively.

Looking ahead to August, the official noted that international oil prices have risen about 11 percent month-on-month so far this month as of Wednesday, with instability in the Middle East continuing to add uncertainty. The official also said a base effect from large mobile carrier discounts offered by some carriers last year would push up the year-on-year producer price inflation rate for August.


forest@heraldcorp.com