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 Korea's producer price index (PPI) was broken for the first time in ten months. This was mainly due to a temporary stabilization in international oil prices following progress in ceasefire negotiations between the United States and Iran, which led to sharp declines in the prices of coal and petroleum products, as well as chemical products. However, the PPI remains much higher than a year ago, and the recent resumption of military clashes between the US and Iran this month is expected to keep uncertainties surrounding price trends going forward.

According to the "June 2026 Producer Price Index (provisional)" released by the Bank of Korea on the 22nd, the PPI for June stood at 130.03 (2020=100), unchanged from the previous month. The rise that had continued for nine consecutive months since September last year has stopped. The producer price index is an indicator that reflects the price changes of goods and services supplied by producers to the domestic market, and typically affects consumer prices with a time lag.

The stabilization of the PPI in June was largely attributable to falling prices of coal and petroleum products as well as chemical products. Coal and petroleum products dropped by 5.3% from the previous month, with the decrease widening compared to May (-2.3%). In particular, naphtha, a key raw material for petrochemicals, plunged 23.5% month-on-month, while jet fuel, used for aviation, dropped 23.4%. Chemical products also declined by 1.8%, turning downward.

Lee Moonhee, head of the Price Statistics Team 1 at the Economic Statistics Department of the Bank of Korea, said, "The continued decline in international oil prices since April appears to have been reflected in oil and chemical product prices with a time lag."

Computer, electronic, and optical devices continued to rise by 2.4% compared to the previous month, driven by strong semiconductor prices. While coal and petroleum products and chemical products saw declines, the rise in computer, electronic, and optical devices partially offset this, resulting in a 0.3% month-on-month decrease in the manufactured goods category, which encompasses these items. Agricultural, forestry, and fishery products rose 0.7%, primarily due to a 2.1% increase in livestock products. The category of electricity, gas, water, and waste rose by 1.0% over the previous month. This was influenced by a 10.6% increase in industrial city gas prices, which reflected a lagged pass-through of international oil price surges after the recent military conflict in the Middle East. Service prices increased by 0.2%, mainly due to a 6.0% rise in brokerage commissions, with financial and insurance services seeing a 2.5% increase driven by stock market gains.

Although the producer price index stopped rising on a month-on-month basis, it was still 8.6% higher than a year earlier, indicating persistent inflationary pressures on consumer prices. Lee added, "Even indices excluding energy rose by 8.2% year-on-year, so the upward momentum continues. The secondary spillover effects of the Middle East military conflict are persisting, and these could act as factors for higher consumer prices in the coming period."

There are mixed factors affecting the PPI outlook for July. Lee explained, "The average price of Dubai crude oil dropped 10% this month through the 20th compared to last month, and reductions in jet fuel surcharges for air cargo and passenger services are downward factors. However, the resumption of military conflict between the US and Iran and the increase in wholesale prices for industrial city gas are upward factors, so the overall direction will depend on the comprehensive survey results."

Meanwhile, the Domestic Supply Price Index, which measures price changes, including imports, rose by 0.7% from the previous month. Raw materials, intermediate goods, and finished goods all increased, mainly due to imports, by 2.1%, 0.5%, and 0.5% respectively. In addition to an increase in the KRW-USD exchange rate, the smaller decline in international oil prices in May, which is reflected in June import clearance prices, led to a rise in import prices based on customs clearance.

The Overall Output Price Index, which adds exports to domestic shipments, was up 0.4% compared to the previous month, as the export sector grew. Agricultural, forestry, and fishery products rose by 0.9%, manufactured goods by 0.4%, and services by 0.2%. Among exports, computer, electronic, and optical devices contributed to the price increase. The overall output price index surged 17.6% from the same month a year earlier, marking the highest growth rate since the statistics began in 2010, surpassing the previous record high of 16.8% set just a month ago in May.

Lee noted, "The sharp rise in export prices, especially for computer, electronic, and optical devices, had more impact than domestic prices. This implies improvements in the terms of trade and could lead to increased overseas sales by domestic producers."

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