Producer price increases lose steam

Korea’s producer price growth decelerated to a 26-month low in April mainly due to a slower gain in costs of manufactured products, the central bank said yesterday.

The producer price index, a barometer of future consumer inflation, rose 2.4 percent on-year to 125.3 last month, compared with a 2.8 percent increase in March, according to the Bank of Korea.

The on-year gain is the lowest since the 2.4 percent advance reported for February 2010.

Producer prices also edged down 0.1 percent from the previous month, compared with an on-month increase of 0.6 percent tallied in March.

The slower gain last month was largely attributed to the growth decrease in manufactured goods prices in the cited month. It said prices for utilities and services grew at a slower clip, as well.

Prices of agricultural and fisheries products, however, gained 0.2 percent from minus 3.1 percent growth reported for the month before.

“The slowdown in producer prices was mainly affected by manufactured goods in petrochemical and metal products,” a BOK official said.

She said international crude prices that shot up 13 percent in March gained 1.4 percent in the cited month, which helped lower numbers in refined petroleum and chemical products.

Other areas where prices fell were in copper, aluminum and steel.

Prices for manufactured goods gained 2.5 percent on-year and just 0.2 percent on-month. Public utilities prices rose 10.1 percent, but this was lower than 10.8 percent reached a month earlier, while services fees gained 1.0 percent vis-a-vis April 2011.

The latest developments are expected to exert a positive influence on domestic consumer prices, the central bank said.

It also said there have been few benefits felt from the free trade agreement with the United States that went into effect in mid-March.

The BOK predicted the full impact of the FTA with the United States should start to materialize the second half of this year, which may make it easier for the country to control price hikes that reached 4 percent last year.

Last year’s figure marked the upper limit of central bank’s 2-4 percent target band. For this year, Seoul expects consumer prices to rise 3.2 percent.

Yonhap