Bank of Korea Reports April Producer Price Index Was Up 2.5% While Raw Materials Surge 28.5% Since Foreign Exchange Crisis in 1980
Producer price inflation in April hits highest level since Asian financial crisis.
As international oil and raw material prices rose in the aftermath of the Middle East war, domestic producer prices soared by the largest margin in about 28 years.
According to the Bank of Korea on May 21, the producer price index in April of this year was 128.43 (100 at the 2020 level), which rose by 2.5% from the previous month (125.35). This is the highest growth rate since February 1998 (2.5%) during the Asian Financial Crisis.
The producer price index continued its upward trend for the eighth consecutive month since September of last year.
Among manufactured goods, the growth rate of petroleum and coal products was 31.9%, almost the same as the previous month (32.0%). The year-on-year growth rate (73.9%) was the highest in three years and ten months since June 2022 (83.3%).
Among detailed items, solvent rose by 94.8% and diesel by 20.7%, respectively, compared to the previous month.
Lee Moon-hee, head of the Price Statistics Team at the Bank of Korea, explained, “In March, gasoline, diesel, and naphtha prices rose significantly,” and “Entering April, the margin of increase in naphtha prices narrowed, but the margin of increase in gasoline, diesel, and kerosene was continuously maintained, and jet fuel rose significantly.”
Agricultural, forestry, and marine products fell by 1.0%, centered on agricultural products (-4.0%) and marine products (-3.2%), and electric power, gas, water, and waste rose by 0.3%, mainly driven by industrial city gas (3.9%).
Services rose by 0.8%. Among services, finance and insurance rose by 26.2% compared to the same month of the previous year, recording an all-time high since the statistics were first compiled in 1995. This was influenced by the fact that brokerage commissions surged by 119.0% from a year ago due to the favorable stock market.
The domestic supply price index, which measures price fluctuations including imported goods, rose by 5.2% from the previous month.
Raw materials rose by 28.5%, recording an all-time high since the statistics were first compiled in 1980. Intermediate goods and final goods also rose by 4.3% and 0.5%, respectively. By use, capital goods, consumer goods, and services rose uniformly by 0.5% each.
The total output price index for April, which adds export goods to domestic shipments, also rose by 3.9%. Agricultural, forestry, and marine products fell by 0.8%, but manufactured goods rose by 5.8%.
Regarding the impact on consumer prices, Team Head Lee said, “As the Middle East war continues, the effects of raw material supply disruptions and raw material price increases are spreading to various sectors with a time lag, acting as upward pressure on producer prices, and this is expected to act as an upward factor for consumer prices as well.”
He added, “There is high uncertainty as there are also impacts from market demand conditions, business environments, and government policies.”
Regarding the outlook for producer prices in May, he said, “Looking at the average until May 19, Dubai crude prices and the won-dollar exchange rate fell slightly compared to the previous month’s average,” but noted, “Industrial city gas or domestic air passenger fares are expected to rise.”
He then stated, “It is difficult to prejudge the trend as increases in raw material prices and other factors are acting complexly.”
Jung Suk-yee
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