Korea’s producer price index down for third straight month in June

South Korea’s producer prices dropped for the third straight month in June, driven by falling costs of raw materials and industrial goods.

According to data released by the Bank of Korea (BOK) on Friday, the country’s producer price index (PPI), a key barometer of future inflation, reached 119.84 in June, down 0.2 percent from 120.03 in May. The index uses 2015 data as a benchmark of 100.

This marks the third straight month of decline following 0.1 percent in April and 0.4 percent in May. It is also 0.2 percent lower than a year ago, marking the first time in two years and seven months for the index to fall on year since November 2020.

“Electricity and gas prices increased in June but the prices of industrial goods such as petroleum, chemicals, and primary metal products decreased,” said Seo Jung-seok, head of the BOK’s price statistics team. “The index also fell 0.2 percent from a year ago due to the base effect from last year when international oil prices soared.”

By product, prices of coal and petroleum products fell 3.7 percent, agricultural products 1.4 percent, and chemical products 1.3 percent in June from a month earlier, data showed.

However, prices of electricity, gas, water, and waste rose 1.8 percent, while prices of finance and insurance gained 0.6 percent and restaurants and accommodation 0.1 percent.

The domestic supply price index, which measures price changes of goods including imported items, fell 1.3 percent in June compared to the previous month.

This was due to declines in prices for raw materials, intermediate goods, and final goods, which dropped by 7.5 percent, 1.0 percent, and 0.3 percent, respectively.

The total output price index, including both domestic shipments and exports, also fell 0.8 percent in June from May, driven by declines in industrial goods (-1.5 percent) and agricultural, forestry, and fishery products (-1.3 percent).

“In July, oil prices are expected to go up as well as agricultural prices due to heavy rains,” Seo said. “We need to keep a close eye on the trend of producer prices as the producer price index may fluctuate, depending on oil prices and any additional increases in public utility fees.”