Producer Price Index Hits Highest Growth in 28 Years... Consumer Price Pressure Mounts

Producer Price Index Up 2.5% in April from Previous Month
Highest Growth Since February 1998
Raw Material Supply Disruptions from Middle East War
Sharp Increases in Coal, Petroleum, and Chemical Product Prices
Eight Consecutive Months

Last month, the Producer Price Index (PPI) rose by 2.5% compared to the previous month, marking the highest rate of increase since February 1998. The ongoing war in the Middle East has led to continued disruptions in the supply of raw materials, resulting in higher prices for coal and petroleum products, chemical products, and increased air transportation costs, all contributing to this upward trend. With the PPI rising for eight consecutive months and the increase in April significantly outpacing that of March, the burden on consumer price inflation is mounting.

Producer Price Index Sees Highest Rate of Increase in 28 Years and 2 Months

According to the "April 2026 Producer Price Index (Preliminary)" released by the Bank of Korea on the 21st, last month's producer price index stood at 128.43 (2020=100), up 2.5% from the previous month. This is the first time in 28 years and 2 months, since February 1998 (2.5%), that the PPI has risen by as much as 2.5% month-on-month. The PPI has now been on an upward trajectory for eight consecutive months since September last year. Compared to the same month last year, the index jumped 6.9%, the highest rate since October 2022 (7.3%).

By item, manufactured goods saw a significant jump for the second consecutive month. Due to raw material supply disruptions stemming from the ongoing Middle East war, the prices of coal and petroleum products (31.9%) and chemical products (6.3%) climbed, resulting in a 4.4% increase in manufactured goods compared to the previous month. Notably, coal and petroleum products surged by 31.9% month-on-month. While this is a slight decrease from the previous month's 32.0% increase, the growth rate remains high. Year-on-year, coal and petroleum products soared by 73.9%, the highest level since June 2022 (83.3%) in three years and ten months. Among the detailed items, there were sharp increases in solvents (94.8%), diesel (20.7%), polyethylene resin (33.3%), and polypropylene resin (32.0%).

Lee Moonhee, Head of the Price Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, explained, "In March, the prices of petroleum products such as gasoline and diesel, as well as naphtha, rose sharply. In April, while the increase in naphtha prices moderated, the upward trend in gasoline, diesel, and kerosene continued, and jet fuel prices rose significantly, keeping the overall rate of increase for coal and petroleum products similar to that in March." He added, "The extent of price increases for gasoline and diesel was not fully reflected in March due to the government's price cap on petroleum products, with some delayed impact showing up in April. As different items saw sharp increases in March and April, the overall rate of increase appeared similar to that of March."

In addition to manufactured goods, electricity, gas, water supply, and waste, as well as services, also saw price increases. The electricity, gas, water supply, and waste category rose by 0.3% from the previous month, with industrial city gas up by 3.9%. Services rose by 0.8% month-on-month, as transportation services (1.6%)—mainly air transportation—increased, and financial and insurance services (3.0%) rose due to higher commission fees for consignment sales (8.1%) driven by stock market gains. The consignment sales commission rate marked its highest increase since February (14.8%). Year-on-year, this figure surged 119%, the highest since October 1999 (137.9%) in 26 years and 6 months. In contrast, agricultural, forestry, and fishery products fell by 1.0% month-on-month, as agricultural products (-4.0%) and fishery products (-3.2%) declined.

Upward Pressure Remains in May… Heightened Consumer Price Pressure

Analysts say it is still difficult to predict the direction of the PPI for this month. From the beginning of May through the 19th, the daily average international oil price and the won-dollar exchange rate have fallen somewhat compared to the monthly average for April. However, the impact of raw material supply disruptions caused by the Middle East war is expected to ripple through various sectors with a time lag, exerting upward pressure on the PPI. Lee commented, "In May, prices of industrial city gas and domestic air passenger fares are expected to rise. The combined effects of declining oil prices or exchange rates and the delayed pass-through of higher raw material prices are likely to interact in a complex manner."

The Producer Price Index measures changes in the prices of goods and services supplied by producers to the market and is reflected in the Consumer Price Index with a lag of about one to three months depending on the item. Lee noted, "As the Middle East war continues, disruptions in raw material supply and higher raw material prices are exerting upward pressure on the PPI with a time lag across various sectors, and this will also exert upward pressure on consumer prices." However, he added that the extent and timing of the pass-through of changes in raw material and intermediate goods prices to consumer prices are highly uncertain, as they are influenced by factors such as market demand, business conditions, and government policy, in addition to cost increases. Lee further explained, "Since the Consumer Price Index reflects prices at which products are sold directly to consumers after passing through the distribution process, there may be differences in the extent of fluctuations between the PPI and CPI due to discounts and other factors in the distribution process."

Meanwhile, the Domestic Supply Price Index, which measures price changes for goods and services supplied domestically (including both domestic shipments and imports), rose by 5.2% from the previous month, led by intermediate goods (4.3%) and raw materials (28.5%). Raw materials prices increased mainly due to the time-lagged impact of the sharp rise in international oil prices in March being reflected in April's import prices based on customs clearance. Year-on-year, the index rose 9.9%. The Total Output Price Index, which measures price changes for goods and services based on total output (including exports in addition to domestic shipments), rose by 3.9% month-on-month, led by manufactured goods (5.8%). Compared to the same month last year, it jumped 13.8%.

This content was produced with the assistance of AI translation services.