Producer prices 2.5% rise, won–dollar 1,519.4won

As the prolonged war in the Middle East sent international oil prices sharply higher, upward pressure on domestic prices is increasing. According to the Bank of Korea, producer prices rose month on month by 2.5%. This change reflects the impact of energy and raw material prices being passed through at the production stage.

Compared with the same month a year earlier, producer prices rose by 6.9%. This is the highest level in recent years. The country’s reliance on imports for most of its crude oil, gas and raw materials is affecting prices.

Among the detailed categories, prices of coal and petroleum products soared by 31.9% in a month, while chemical products rose by 6.3%. Sharp increases in international oil and naphtha prices pushed up production costs. This impact was directly reflected in producer prices.

Last 2as a result of the war that broke out at the end of 3the increase in producer prices widened again in 1.6was recorded. 4In , the rise accelerated further as the impact of a sharp surge in international oil prices took full effect. Raw material prices have continued to fluctuate.

At the beginning of this month, the won-dollar exchange rate moved in a range around 1,450won, then began rising after midmonth. 15On 1,500it broke through the won threshold. The situation of a weak won has continued since then.

Last 22during trading, the won-dollar exchange rate rose as high as 1,519.4won. Foreign-exchange trading aimed at short-term gains also contributed to the rise in the exchange rate. Signals of price instability are intensifying as high oil prices and a weak won occur simultaneously.

For the government and businesses, higher import costs could feed through to selling prices. Whether this will translate into higher consumer prices remains to be seen in the coming trends. For the time being, energy and raw material prices and exchange-rate fluctuations remain key variables.