South Korea October producer prices mark fastest growth in 13 years

An employee works in an assembly line at a mask factory in Icheon
FILE PHOTO: An employee works in an assembly line at a mask factory in Icheon, South Korea, March 6, 2020. REUTERS/Heo Ran

November 18, 2021

SEOUL (Reuters) – South Korea’s producer prices index (PPI) in October posted its sharpest growth in 13 years, central bank data showed on Friday, underlining oil-led inflationary pressure and supporting further policy tightening.

The PPI last month jumped 8.9% from a year earlier, the Bank of Korea data showed, the fastest pace since October 2008 and extending the growth to an 11th straight month. It rose 7.6% in September.

Breakdown of data showed a 15.4% jump in producer prices for industrial goods was the biggest driver, with that for coal and petroleum products surging 85.6% year-on-year.

Producer prices for electricity, gas and tap water, agricultural, livestock and fisheries goods, and services also grew 6.2%, 2.6% and 2.4%, respectively.

After recent surge, oil prices, however, slid to near six-week lows on Thursday after China said it was moving to release reserves following a Reuters report that the United States was asking big crude consumers to consider a coordinated release of stocks to lower prices.

South Korea’s central bank will hold the last rate decision meeting of the year on Nov. 25, after its governor last month said “the bank can consider raising rates further at the next meeting”.

The policy interest rate currently stands at 0.75%.

The bank is also expected to release revised forecasts for inflation next week, after having said in mid-October that it was seen exceeding the 2.1% rise projected in August.

Friday’s data also showed the PPI rose 0.8% on a monthly basis, accelerating from a 0.4% rise in September.

(Reporting by Joori Roh; Editing by Toby Chopra)