Sinking PPI fuels deflation fears as factory prices plummet

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Sinking PPI fuels deflation fears as factory prices plummet

Worries over deflation in Korea deepened as producer prices dipped the lowest in five years amid a slide in global oil prices, data from the central bank showed.

The Producer Price Index (PPI), a gauge of wholesales prices of 886 items, fell 0.3 percent to 100.47 in September from a month earlier, a monthly report from the Bank of Korea said.

The index was the lowest since July 2010, when it stood at 100.17. Year-on-year, it plunged 4.5 percent.

If the reading drops below 100, the benchmark level of the annual monthly average index in 2010, it means the Korean economy is worse than five years earlier.

The official gauge for factory prices has plunged over the past five years since a peak of 107.45 in 2012.

Lower prices in petroleum and petrochemicals pushed down the overall prices of manufactured commodities by 0.6 percent from August.

From a year earlier, the factory products plunged 7.4 percent, pushed down in particular by a 33.8 percent decrease in coal and petroleum products.

Agricultural products were down 4.1 percent month-on-month, while livestock products fell 3.6 percent.

Electricity, gas and water bills climbed 1.5 percent led by an increase in heating gas bills from a month earlier. Service industries showed no change despite revitalized demand in the real estate market.

“There is a feeling that the consumer price index, a gauge for retail prices, is following the trend of PPI in the long term,” a BOK official said.

The decline in global oil prices also affected the gasoline price in Korea, driving it down below 1,500 won ($1.33) per liter on Tuesday.

The average gasoline price per liter stood at 1,499 won in Korea, down 0.56 won from a day before, according to Opinet, an online gasoline price search engine. Seoul had an average gasoline price of 1,583 won, down 1.68 won from Monday.

As of last week, Gwangju, South Jeolla, recorded the lowest gasoline price at 1,475.5 per liter.


BY KIM HEE-JIN [kim.heejin@jooongang.co.kr]

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