High oil prices have pushed South Korea’s factory gate inflation to its highest in 13 years in October, supporting calls for the central bank to hike rate further when it meets next week.
Producer price index (PPI) rose 8.9% year-on-year, accelerating from 7.6% in September, driven by prices of manufactured products, official data showed.
Prices for manufactured goods rose 15.4%, with coal and petroleum products jumped 85.6% year-on-year. Base metals surged 36.4%, while chemical products rose 18.4%. All of these categories rose at quicker pace compared with previous month.
Prices for food and beverage, as well as electronics, rose on an annual basis albeit at a slower pace than previous month.
Broad-based increase
Beyond the industrial goods category, other sub-indexes rose too in October.
Agricultural, forestry and marine products prices rose 2.6%, reversing a 2.7% decline in September.
Prices for electric power, gas, water and waste rose 6.2% against a 3.2% increase in the previous month. Services increased 2.4%, on par with the rise in September.
Rising producers inflation will trickle into consumer inflation, and with the latter forecast to stay above the central bank’s target of 2%, the latest PPI data likely nudge the policymakers to hike rate.
“The pace of factory gate inflation has quickened to a 13-year high and adds further weight to the scenario that the Bank of Korea would tighten policy rate again when they meet next week,” UOB said in a note.
Read more: South Korea central bank keeps rate steady after August hike
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