Producer price index hit all-time high last month
Korea's producer prices continued to rise sharply in September, driven by the upsurge of international oil and commodity prices. According to the Bank of Korea, the producer price index, the sign of future consumer prices, gained 0.2 percent, from 110.86 in August to 111.13 last month, hitting an all-time high. The September reading was up 7.5 percent year-on-year, the steepest jump in more than a decade since April 2011.
Manufactured goods pulled up the prices, reflecting the rise in costs of oil and other commodities. Notably, coal and petroleum led the upward trend with 2.1-percent gains, followed by chemicals and primary metals that rose by 0.4 percent. On the other hand, the producer price index for agricultural and fishery products dropped 0.8 percent from August to 135.90 last month. The services price index remained steady at 109.61, the BOK report said.
Consumer prices have already been on an upward march. Inflation, which was in the mid-2 percent range for the sixth straigh month in September, is likely to surge above 3 percent this month. International crude oil prices have jumped to more than $80 per barrel, and primary commodities have kept on climbing, including coal, iron ore, copper and aluminum. Global economic uncertainty has also led to the weakening of the Korean won, pushing up import prices.
Oil prices and the exchange rate are beyond government control for Korea, which relies on imports for most of its commodity needs. On top of this, the collapse of the global supply chain and ensuing logistical chaos have aggravated a price spiral, leaving policymakers with few effective means to deal with the situation. The business environment and difficulties people are experiencing in their livelihoods are going from bad to worse, as there are signs that the economy might be slow to recover from the COVID-19 fallout.
The government is considering lowering fuel taxes temporarily to ease the burden on consumers. Doing this, however, will only have a limited effect. Policymakers should reduce tariff quotas on major import items, ensure stable supply sources and secure sufficient stockpiles. They should mobilize all policy tools to mitigate corporate damage caused by the fluctuating commodity prices, and minimize the impact inflation has on people's lives.
Korea's producer prices continued to rise sharply in September, driven by the upsurge of international oil and commodity prices. According to the Bank of Korea, the producer price index, the sign of future consumer prices, gained 0.2 percent, from 110.86 in August to 111.13 last month, hitting an all-time high. The September reading was up 7.5 percent year-on-year, the steepest jump in more than a decade since April 2011.
Manufactured goods pulled up the prices, reflecting the rise in costs of oil and other commodities. Notably, coal and petroleum led the upward trend with 2.1-percent gains, followed by chemicals and primary metals that rose by 0.4 percent. On the other hand, the producer price index for agricultural and fishery products dropped 0.8 percent from August to 135.90 last month. The services price index remained steady at 109.61, the BOK report said.
Consumer prices have already been on an upward march. Inflation, which was in the mid-2 percent range for the sixth straigh month in September, is likely to surge above 3 percent this month. International crude oil prices have jumped to more than $80 per barrel, and primary commodities have kept on climbing, including coal, iron ore, copper and aluminum. Global economic uncertainty has also led to the weakening of the Korean won, pushing up import prices.
Oil prices and the exchange rate are beyond government control for Korea, which relies on imports for most of its commodity needs. On top of this, the collapse of the global supply chain and ensuing logistical chaos have aggravated a price spiral, leaving policymakers with few effective means to deal with the situation. The business environment and difficulties people are experiencing in their livelihoods are going from bad to worse, as there are signs that the economy might be slow to recover from the COVID-19 fallout.
The government is considering lowering fuel taxes temporarily to ease the burden on consumers. Doing this, however, will only have a limited effect. Policymakers should reduce tariff quotas on major import items, ensure stable supply sources and secure sufficient stockpiles. They should mobilize all policy tools to mitigate corporate damage caused by the fluctuating commodity prices, and minimize the impact inflation has on people's lives.
