South Korea's producer prices rebound 0.2% in August on heat wave, oil surge

South Korea's producer prices rebounded last month after a scorching heat wave drove up agricultural prices, and the upward trend is expected to continue in September as global oil prices surge.

The Bank of Korea said Friday that the producer price index rose 0.2 percent in August from the previous month, bouncing back within a month after falling 0.4 percent in July. Compared with a year earlier, producer prices were up 7.9 percent.

"Agricultural, forestry and fishery prices rose due to the heat wave, and gains in oil prices fed through to electricity, gas, water and waste services, pushing the overall index up 0.2 percent from the previous month," said Yeon Seung-eun, a senior official at the Bank of Korea's price statistics team.

By category, agricultural, forestry and fishery prices climbed 3.8 percent from the previous month, led by farm produce such as spinach, which rose 4.9 percent, and livestock products including pork, which gained 2.8 percent. "Excluding agricultural, forestry and fishery products, the overall index is estimated to have edged up at a rate below 0.2 percent," said Lee Heung-hu, head of the price statistics team.

Industrial goods were flat compared with the previous month, as a 0.4 percent rise in coal and petroleum products — including solvents and jet fuel — was offset by a 0.7 percent decline in electrical equipment such as wiring harnesses.

Electricity, gas, water and waste services rose 0.9 percent from the previous month, driven by an 11 percent surge in industrial city gas prices on the back of higher oil costs.

Services were roughly flat month on month. Restaurant and accommodation services edged up 0.6 percent, led by hotels and bakeries, but financial and insurance services fell 1.5 percent in the wake of declining share prices.

The domestic supply price index — which combines producer and import prices to measure changes in the prices of goods and services — fell 1.3 percent from the previous month. Intermediate goods fell 1 percent, raw materials dropped 4.6 percent, and final goods declined 0.9 percent, with imports driving the declines across all categories.

The total output price index, which adds exports to domestic shipments, also fell 1.2 percent from the previous month in August. Industrial goods dropped 2 percent, led by exports of chemical products and computers, electronics and optical equipment. Services were unchanged from the previous month.

On the outlook for September, Lee said global oil prices have risen sharply following a resumption of conflict in the Middle East, and wholesale industrial city gas rates were also raised in September. "International oil prices from Sept. 1 through Wednesday were up about 29 percent compared with August, and the wholesale rate for industrial city gas rose 6.6 percent," he said.