South Korea Producer Prices Rise 8.5% in May, Most Since July 2022

May producer prices extend gains for a ninth straight month

Higher oil prices lift chemical products and city gas

Financial services jump as stock rally boosts trading

South Korea’s producer prices rose for a ninth straight month in May as higher oil prices tied to Middle East risks combined with a strong stock market. The annual gain was the biggest in 3 years and 10 months.

The producer price index stood at 129.82 in May, with 2020 as the base year, up 0.8% from a month earlier, according to preliminary data released by the Bank of Korea on June 19. That was slower than April’s 2.5% increase. From a year earlier, the index rose 8.5%, the fastest pace since July 2022, when it climbed 9.2%.

By category, agricultural, forestry and fishery products fell 0.8% from the previous month, as farm products dropped 3.9% on improved harvests of crops including Korean melons. Manufacturing products rose 0.7%.

Chemical products gained 1.8% as crude oil prices surged in the wake of the Middle East war, raising input costs. Primary metal products and computer, electronic and optical equipment rose 1.4% and 1.6%, respectively, supported by demand tied to artificial intelligence investment.

Electricity, gas, water and waste services rose 0.5% from a month earlier. Industrial city gas jumped 10.3% as higher feedstock costs pushed up prices. Coal and petroleum products, which are directly exposed to oil-price swings, surged 77.5% from a year earlier, though they fell 2.3% from the previous month.

Service prices rose 1.2% from April. Financial and insurance services jumped 8.3% as brokerage commissions climbed on a stock-market rally. Transportation services, including international air passenger travel, rose 1.8% as fuel surcharges increased.

Core prices, which exclude food and energy, rose 0.9% from a month earlier and 8.5% from a year earlier. Food prices fell 0.2% on the month, while energy prices rose 0.5%.

The domestic supply price index, which includes imports, was unchanged from the previous month. From a year earlier, it rose 11.7%, the highest since September 2022, when it increased 12.8%, marking the strongest pace in 3 years and 8 months. Within the index, raw materials fell 8.1%, led by imports, as April’s decline in global oil prices was reflected in import prices with a lag. Intermediate goods and final goods rose 1.2% and 0.3%, respectively.

The total output price index, which covers domestic shipments and exports, rose 1.2% from a month earlier. From a year earlier, it climbed 16.7%, driven by exports, the highest since the data series began in 2010.

Lee Jung-woo, Hankyung.com reporter, krse9059@hankyung.com