Heat Wave Sends Food Prices and Gas Bills Higher... August Producer Prices Up 7.9%

[Financial News]  Producer prices rose slightly in August. Prices appeared to be stabilizing as import prices fell, but food prices jumped in the aftermath of the heat wave, while industrial gas rates rose sharply. Producer prices, which reflect wholesale-stage prices, generally affect consumer prices after a certain time lag.
The BOK announced on the 18th that the preliminary August Producer Price Index rose 0.2% from the previous month. It was still at a high level, increasing 7.9% from a year earlier.
Producer prices had continued to rise since March before remaining unchanged in June, at 0.0% from the previous month, and falling 0.4% in July. They turned upward again after just one month.
By category, food prices rose sharply. Poor vegetable harvests caused by the heat wave pushed agricultural products, including spinach, up 4.9% from the previous month. Livestock products, including pork, also jumped 2.8% as livestock deaths increased in the hot weather and supplies declined. As a result, prices of agricultural, forestry, and fishery products rose 3.8% overall.
Energy costs also added to the burden. Industrial city gas rates rose 11.0% due to a sharp increase in natural gas import prices. Combined with the impact of higher oil prices, this drove prices for electricity, gas, water, and waste up 0.9%.
Manufactured product prices were unchanged overall. Coal and petroleum products rose 0.4%, but electrical equipment fell 0.7%. Service prices also showed no overall change: restaurant and accommodation services rose 0.6%, while financial and insurance services, including brokerage commissions, fell 1.5% amid declining stock prices.
The August domestic supply price index, which measures price changes for goods and services including imports, fell 1.3% from the previous month. Import prices declined for raw materials, down 4.6%; intermediate goods, down 1.0%; and final goods, down 0.9%.
Lee Heung-hoo, head of the BOK's Price Statistics Team, explained, "The decline in domestic supply prices from the previous month resulted from factors including the 3.4% drop in international oil prices based on Dubai crude in July and the 6.1% decrease in the won-dollar exchange rate, after their effects were reflected through customs-clearance time lags for individual items."
The August Gross Output Price Index, which combines domestic shipments with exports, also fell 1.2% from the previous month. This was due to a 2.0% decline in manufactured product prices, led by chemical products and computers, electronic equipment, and optical instruments.
[email protected] Jung Sang-gyun Reporter