South Korea's producer price index turned downward last month for the first time in 11 months.

While agricultural prices surged due to a heatwave, the downward impact of international oil prices played a greater role.

According to the Bank of Korea today (August 21), the producer price index for July of this year stood at 129.39 (based on 100 in 2020), down 0.4 percent from the previous month (129.92).

After rising for nine consecutive months from September of last year to May of this year, the index remained flat in June before turning downward in July.

Compared to the same month last year, the year-on-year increase rate peaked at 8.6 percent in May—the highest since July 2022 (9.2 percent)—and gradually slowed to 8.5 percent in June and 7.7 percent in July.

Looking at the month-on-month fluctuations by item, manufactured goods fell 0.5 percent overall, dragged down by a 5.1 percent drop in coal and petroleum products and a 1.3 percent decline in chemical products due to lower international oil prices.

Electric power, gas, water, and wastes fell 0.6 percent.

This was driven by an 11.8 percent decrease in residential electricity prices following the relaxation of progressive electricity pricing brackets during the summer season.

Services dropped 0.4 percent, led by a 7.1 percent decline in financial and insurance services, centered on brokerage commissions, amid falling stock prices.

Conversely, agricultural, forestry, and marine products rose 1.5 percent, led by agricultural products (2.4 percent) due to the heatwave and poor crop conditions.

By detailed item, steep declines were recorded in diesel (-9.8 percent), gasoline (-11.3 percent), and brokerage commissions (-16.8 percent).

On the other hand, items such as spinach (115.8 percent) and other fish (15.5 percent) saw significant increases.

The domestic supply price index, which measures price fluctuations including imports, fell 1.8 percent from the previous month.

Intermediate goods (-1.7 percent), raw materials (-7.7 percent), and final goods (-0.2 percent) all declined across the board, led by imports.

By intended use, capital goods (-0.5 percent) and consumer goods (-0.9 percent) decreased, while services (0.4 percent) increased.

The total output price index for July, which includes domestic shipments as well as exports, also fell 0.2 percent.

While agricultural, forestry, and marine products rose 1.4 percent, manufactured goods fell 0.2 percent.

Regarding the outlook for August, Lee Heung-hoo, head of the Price Statistics Team at the Bank of Korea, stated, "Based on the period from August 1 to 19, international oil prices rose by about 11 percent compared to the previous month." He added, "Industrial city gas wholesale rates were hiked entering August, and instability in the Middle East continues, which could act as upward pressure on producer prices."

"The base effect from some corporate telecommunication fee discounts in August of last year could also act as a factor raising the year-on-year growth rate," he noted.

Regarding the impact of the heatwave, Team Head Lee said, "Agricultural, forestry, and marine products rose 1.5 percent as the heatwave in July led to poor crop conditions for some vegetables and the death of farmed fish due to high water temperatures." He added, "However, in July of last year, prices rose 5.6 percent from the previous month due to a heatwave and monsoon rains, so compared to then, this year's growth rate is not high."

(Photo: Yonhap News)