Producer Price Increases End After 10 Months as International Oil Prices Fall

June Producer Price Index Holds Steady from Previous Month

International Oil Prices Stabilize After Surge

Coal, Petroleum, and Chemical Products See Sharp Declines

Still High Compared to a Year Ago... "Consumer Price Pressures Persist

Last month, the upward trend in South Korea's producer prices broke for the first time in ten months. This was largely due to a temporary stabilization of international oil prices following progress in ceasefire negotiations between the United States and Iran, resulting in a significant drop in the prices of coal and petroleum products as well as chemical products. However, producer prices remain elevated compared to a year ago, and with armed conflict between the US and Iran resuming this month, uncertainty surrounding future price trends is expected to persist.

According to the "June 2026 Producer Price Index (Preliminary)" released by the Bank of Korea on the 22nd, the producer price index (PPI) for June stood at 130.03 (2020=100), unchanged from the previous month. This marks the end of a nine-month increase that had begun in September last year. The producer price index tracks changes in the prices of goods and services supplied by producers to the domestic market and typically influences consumer prices with a time lag.

The flat movement in the June producer price index was largely due to declines in the prices of coal and petroleum products and chemical products. Coal and petroleum products dropped 5.3% compared to the previous month, with the pace of decline widening from May’s 2.3% decrease. In particular, naphtha, a major feedstock for petrochemicals, fell 23.5% month-on-month, while jet fuel, used in aviation, dropped 23.4%. Chemical products also fell by 1.8%, reversing to a downward trend.

Moonhee Lee, Head of the Price Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, said, “As international oil prices continued to decline month-on-month since April, this was gradually reflected in the prices of petroleum and chemical products.”

Computers, electronics, and optical devices continued their upward trend, rising 2.4% from the previous month on the back of strong semiconductor prices. With declines in coal and petroleum products and chemical products, and increases in computers, electronics, and optical devices, the broader category of manufactured goods fell 0.3% from the previous month. Agricultural, forestry, and fishery products rose 0.7%, led by a 2.1% increase in livestock products. Electricity, gas, water supply, and waste management climbed 1.0% month-on-month, as higher international oil prices following conflict in the Middle East were reflected with a delay in the cost of feedstock for industrial city gas, resulting in a 10.6% increase in industrial city gas prices. Services rose 0.2%, driven by a 6.0% increase in brokerage commission fees due to a stock market rally and a 2.5% rise in financial and insurance services.

While the producer price index stopped rising compared to the previous month, it was still up 8.6% from a year earlier, indicating sustained high price pressure and ongoing upward pressure on consumer prices. Lee commented, “Even indices excluding energy are up 8.2% compared to a year ago, showing continued strength. Secondary spillover effects from the armed conflict in the Middle East are continuing, which could keep pushing up consumer prices for some time.”

For July, analysts note that both upward and downward factors are mixed. Lee said, “As of the 20th of the month, the average price of Dubai crude oil has dropped by 10% from the previous monthly average, and jet fuel surcharges for air cargo and passenger services have been lowered, which are downward factors.” However, he added, “The renewed hostilities between the United States and Iran and the increase in wholesale rates for industrial city gas are upward factors, so the overall direction will depend on a comprehensive analysis of the data.”

Meanwhile, the Domestic Supply Price Index, which tracks price changes including imported goods, rose 0.7% month-on-month. Raw materials, intermediate goods, and final goods each rose 2.1%, 0.5%, and 0.5%, respectively, largely due to increases in the prices of imported goods. This stemmed from a rise in the won–US dollar exchange rate and the narrowing of the decline in the international oil prices for May (which are reflected in June’s import prices) compared to the previous month, pushing up import prices on a customs clearance basis.

The Total Output Price Index, which adds exports to domestic shipments, rose 0.4% from the previous month as the export sector advanced. Agricultural, forestry, and fishery products increased by 0.9%, manufactured goods by 0.4%, and services by 0.2%. The rise in the export sector was driven by computers, electronics, and optical devices, among others. The Total Output Price Index jumped 17.6% from the same month last year, marking the highest increase since statistics were first compiled in 2010. This exceeds the previous record of 16.8% set just one month ago, in May.

Lee added, “The big driver was a sharp increase in export prices, particularly for computers, electronics, and optical devices, rather than domestic prices. This suggests an improvement in the terms of trade and that Korean producers may see increased overseas revenue.”

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