By Na Jeong-ju
Staff Reporter
Prices charged by manufacturers for their products rose at their fastest pace in a decade in March, reflecting a surge in prices of commodity, service, agricultural and fishery goods, the central bank said Wednesday.
The faster rise in producer prices will raise upward pressure on consumer prices, which have already risen sharply here, forcing indebted households to cut their spending.
Sluggish domestic spending will dampen economic growth, but top policymakers have said they will prioritize growth-spurring measures instead of curbing inflation, raising worries at the Bank of Korea (BOK).
Producer prices rose 8 percent in March from a year ago, the sharpest growth since Nov. 1998, when prices jumped 11 percent. Prices rose 1.7 percent from a month ago, marking the fastest monthly growth since 2.4 percent in Feb. 1998, according to the BOK.
``Some economists say crude oil price has already reached its peak, but a high oil price still remains the key factor for increases in prices,'' a BOK official said.
Producer prices have risen sharply in recent months, rising 5.9 percent in January and 6.8 percent in February year-on-year.
The price of Dubai crude, South Korea's benchmark, jumped 64.4 percent in March, compared with a year earlier. The world's fifth-largest crude buyer relies entirely on imports for its oil needs.
The price data came one day before the BOK's Monetary Policy Committee, headed by Governor Lee Seong-tae, decided on its benchmark interest rate for April. Despite calls from the government to cut rates to support economic recovery, the committee is expected to freeze the rate at 5 percent for the eighth consecutive month in view of rising inflationary pressure.
The National Statistical Office said consumer prices rose 3.9 percent in March, accelerating from a 3.6 percent gain the previous month. Prices have risen above the BOK's target range of 2.5 to 3.5 percent for four months.
Besides high oil prices, rising grain prices are adding concerns for policymakers.
The price of agricultural and fisheries goods jumped 1.9 percent in March from a month ago, rising from a 0.9 percent gain in February. The average price of rice, beans and other crops rose 1.5 percent.
``Growing inflation, coupled with the won's overall weakness against the dollar, is casting a shadow on the country's efforts to maintain growth momentum,'' the National Assembly Budget Office said in a report. ``To attain its inflation target, Korea should push for a stronger won, while strengthening liquidity controls through interest rate policies.''
BOK Governor Lee has warned of rising inflation, saying that inflation for the full year could be higher than the bank's previous forecast. The central bank forecast earlier consumer prices will grow 3.3 percent this year, up from a 2.5 percent gain last year.