Producer Prices Rise for Second Straight Month... Cabbage Jumps 42.9% on Chuseok Demand

Summer electricity rate discounts end; residential electricity prices rise 13.4%
Exchange rate weighs on computer, electronic, and optical equipment prices in August and September
Upward pressure on consumer prices; production cost burdens build ami

Domestic producer prices rose for the second consecutive month. Prices of agricultural, forestry, and fishery products, including Chinese cabbage, beef, and pork, increased as demand grew ahead of Chuseok. Residential electricity prices also rose again after the summer discount on the progressive electricity rate ended.

Rising producer prices are expected to put upward pressure on consumer prices going forward. Although the month-on-month increase has recently been modest, coal and petroleum products, chemical products, and other intermediate goods have posted high year-on-year price increases. Industrial natural gas rate hikes have also continued, adding to the accumulated burden of production costs, analysts say.

According to the "September 2026 Producer Price Index (Preliminary)" released by the Bank of Korea on October 21, the producer price index last month stood at 129.78 (2020=100), up 0.2% from the previous month. This followed a 0.1% increase in the previous month. The index rose 7.7% year on year, driven by increases in coal and petroleum products, chemical products, and other items. The producer price index measures changes in the prices of goods and services supplied by producers to the domestic market. Such changes generally affect consumer prices after a time lag.

The rise in agricultural, forestry, and fishery product prices (2.6%) on the back of holiday demand was a major factor in the continued increase in producer prices last month. Agricultural products rose 3.7%, driven by Chinese cabbage and other items, whose prices surged 42.9% from the previous month, while livestock products climbed 2.6%, led by beef (10.4%). Electricity, gas, water, and waste services also rose 1.3%, as residential electricity prices jumped 13.4% following the end of the summer discount on the progressive electricity rate.

 

Prices of manufactured goods were unchanged from the previous month. Chemical products (1.0%), including ethylene and container boxes, rose, but computer, electronic, and optical equipment prices fell 1.7%. Computer storage devices (-11.8%) and OLEDs (- 4.0%) were among the items that declined. Analysts say the decline in computer, electronic, and optical equipment prices in August and September was partly affected by the fall in the exchange rate. "OLEDs, LCDs, DRAM, and flash memory are traded domestically based on their international benchmark prices in U.S. dollars," said Lee Heung-hu, head of the Price Statistics Team at the Bank of Korea's Economic Statistics Department 1. "The exchange rate fell, lowering the prices of these items and affecting producer prices." Lee added, "The fixed transaction prices for memory semiconductors, which suppliers and buyers agree on, rose in the first three quarters. International transaction prices continued to rise through September. We need to watch how things develop in the fourth quarter."

Service prices also fell 0.1%. As the summer peak season ended and off-season rates took effect, hotel·tourist accommodation facilities, among others, saw prices fall, contributing to a 0.6% decline in restaurant and accommodation services.

Analysts say it remains to be seen whether producer prices will continue to rise this month. "The decline in international oil prices through the middle of this month is a downward factor for producer prices. By contrast, the increase in wholesale rates for industrial natural gas in October and the rise in fuel surcharges for air cargo and passenger flights will act as upward factors," Lee said.

Domestic supply prices were unchanged from the previous month. Raw material prices (3.2%) rose, but intermediate goods (-0.3%) and final goods (-0.3%) fell, mainly due to imports. The domestic supply price index measures changes in the prices of goods and services shipped domestically and imported, and is used to track the process by which price changes ripple through the economy.

The total output price index fell 0.1% from the previous month in September. It rose 14.7% year on year. Prices of manufactured goods, including computer, electronic, and optical equipment (-0.4%), fell from the previous month, mainly due to exports. Service prices also declined 0.1%. The total output price index measures price changes in goods and services on a total output basis, including exports as well as domestic shipments, to track overall price changes in domestically produced goods.

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