PPI sees mild relief in July in wake of oil price dip

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PPI sees mild relief in July in wake of oil price dip

Producer prices declined for the first time in nearly three years in July due to falling oil costs, the central bank said yesterday, pointing to easing pressure on consumer inflation in Asia’s fourth-largest economy.

The producer price index (PPI), a barometer of future consumer inflation, fell 0.1 percent in July from a year earlier, a turnaround from a 0.8 percent on-year gain in June, according to the Bank of Korea.

The July figure marks the first decline since November 2009, when such prices fell 0.4 percent on-year.

Compared with the previous month, the index shed 0.5 percent in July after falling 1.4 percent the previous month, it added. It marked the fourth straight month of decline.

The BOK said falling prices of agricultural products and retreating oil costs drove down the country’s producer prices last month.

The data comes one day after BOK policy makers froze the key interest rate at 3 percent, following a surprise rate cut in July. Analysts predicted that the central bank is likely to further cut the rate within this year given sputtering growth and eased inflationary pressure.

The economy grew 0.4 percent on-quarter from April to June on weakening exports and sluggish domestic demand. Annual consumer inflation eased to a 12-year low of 1.5 percent in July.

BOK Governor Kim Choong-soo said on Thursday that rising global grain prices will likely add upward pressure to consumer prices from early year, but the impact will not be dramatic. The BOK aims to keep the median consumer inflation target at 3 percent for 2010-12. Yonhap

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