Korea¡¯s PPI up 6.4% on yr, fastest in nearly 10 yrs, boding bad for H2 inflation

[Photo by Lee Seung-hwan]

South Korea¡¯s producer prices strengthening for the seventh straight month in line with the unfazed gains in international commodity prices accelerated in the fastest pace in nearly 10 years from the previous year in May, spelling inflationary pressure in the second half despite authorities¡¯ claim of easing.

According to data released by the Bank of Korea on Monday, Korea¡¯s producer price index (PPI) in May gained 0.4 percent to 108.50 from the previous month. It has been building up monthly since November, the longest rising streak after the Aug. 2016-Feb. 2017 case.

From a year-ago period, the PPI gained 6.4 percent, strongest since August 2011.

PPI refers to the wholesale cost of goods and services and influences consumer prices in coming months.

The oil price hike and commodity price rise have mainly led the growth of overall costs for produces last month, the central bank said.

Prices of factory produces increased 1.0 percent from a month earlier. Coal and petroleum products prices expanded 4.4 percent on month to drive up the overall PPI. Primary metal prices added 1.6 percent. Diesel prices climbed 6.5 percent, naphtha 5.8 percent, and portable fuel 11.7 percent. Prices of LCD panels for laptop computers also were up 6.7 percent.

Prices of agricultural, livestock and fishery products dropped 1.2 percent due to a 3.6 percent price fall in agricultural products. Onion prices plunged 40.3 percent, scallion 32.3 percent, and frozen vegetables 15.9 percent.

Service prices added 0.1 percent from the previous month, led by a rise in restaurant/accommodations service (0.2 percent) and real estate management service (0.1 percent). Hotel prices rose 2.7 percent, passenger flight service on domestic routes 9.5 percent, and residential real estate management service 0.7 percent.

Producer prices excluding food and energy gained 0.5 percent on month to 109.10. Compared to a year ago, the prices jumped 6.1 percent, the biggest since June 2011.

Domestic supplier index, which includes prices of imported goods, was up 0.5 percent on month with an increase in raw material prices (0.5 percent), intermediary goods (0.6 percent) and finished goods (0.3 percent).

The total output price index, which includes exports, also went up 0.8 percent on month and 7.5 percent on year.

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