"Oil Products Surge 30%"...Producer Price Index Posts Fastest Rise in 4 Years

[The Financial News] Rising international oil prices caused by turmoil in the Middle East are pushing up domestic producer prices. Because the impact that began at the end of February was fully reflected in March, the Producer Price Index posted its sharpest increase in four years. Coal and petroleum products, which surged more than 30%, were the main driver.
According to the Bank of Korea (BOK) on the 22nd, the Producer Price Index rose 1.6% in March from the previous month. That was 1.0 percentage point higher than February's 0.6% gain, and it marked seven consecutive months of increases since September last year, when it rose 0.4%. It was the highest reading since April 2022, when it also rose 1.6%, and the strongest in 3 years and 11 months.
Compared with the same month a year earlier, it rose 4.1%, the highest since February 2023, when it increased 4.8%, and the strongest in 3 years and 1 month.
Agricultural, forestry and fishery products fell 3.3% over the period, dragged down by declines in farm products (-5.0%) and livestock products (-1.6%). That reversed the previous month's 2.4% increase. Industrial products rose 3.5% from a month earlier, led by coal and petroleum products (31.9%), chemical products (6.7%), and computers, electronic and optical devices (4.1%). The increase was seven times larger than February's 0.5% gain.
In particular, the rise in coal and petroleum products was the highest since December 1997, when it reached 57.7%, and the strongest in 28 years and 3 months, or 339 months.
Electricity, gas, water and waste prices fell 0.1% on the back of a 3.0% decline in industrial city gas. Services were flat overall, as gains in restaurant and lodging services (0.1%) and real estate (0.1%) were offset by declines in transportation services (-0.2%) and finance and insurance (-0.2%).
Moon-hee Lee, head of the Price Statistics Team at the BOK's Economic Statistics Department 1, said, "Although average oil prices in April are lower than in the previous month, the impact of earlier increases in raw material prices will gradually spread." She added, "This is expected to act as upward pressure on producer prices."
Lee also noted, "The extent and time lag with which changes in raw material and intermediate goods prices affect consumer prices depend on business conditions, market competition, and government policy." She added, "The timing differs by item, but higher producer prices can put upward pressure on consumer prices."
The Producer Price Index measures changes in the prices of goods and services supplied by domestic producers to the domestic market. It is used as an indicator of business conditions and as a GDP deflator. However, because it measures price changes, it does not show absolute price levels.
Looking at special classifications beyond the basic five-sector breakdown, food prices fell 1.6% from a month earlier and fresh food prices dropped 7.0%. Energy rose 4.2%, while information technology (IT) climbed 1.7%. Excluding food and energy, prices rose 1.6%.
The Domestic Supply Price Index rose 2.3% in March from the previous month. The increase reflected gains in intermediate goods (2.8%), raw materials (5.1%), and final goods (0.6%).
The Domestic Supply Price Index is calculated to provide a more comprehensive measure of price changes for goods and services supplied in the domestic market by combining prices for goods and services produced and shipped domestically with those produced overseas and imported into the country.
The Gross Output Price Index rose 4.7% from the previous month, driven by industrial products that jumped 7.9% month on month, even though agricultural, forestry and fishery products fell 3.0%. Exports rose 14.6% and domestic shipments increased 3.5%, extending the index's gains for nine straight months since July last year, when it rose 0.5%. Compared with the same month a year earlier, it was up 9.0%.
The Gross Output Price Index is calculated by combining the Producer Price Index and the export price index, serving as a benchmark for gauging overall price changes in domestically produced goods and services, including those exported overseas.

taeil0808@fnnews.com Kim Tae-il Reporter