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Buoyed by oil prices, producer prices see first growth in 5 months

Buoyed by the recovery of global oil prices, South Korea’s producer price index rose 0.5 percent on-month in June, ending a monthslong slide, the nation’s central bank said Tuesday.

The producer price index for all commodities and services here inched up 0.5 percent on-month to 102.52, data released by the Bank of Korea showed. It had remained flat in May after extending a decline in the February-April period, weighed down by the coronavirus pandemic.

“The recovery of global oil prices that pushed up the prices of industrial products” contributed to the latest reading, according to the BOK.

Oil prices recovered early Tuesday on the back of reports that a coronavirus vaccine the University of Oxford is developing showed promising results in advanced trials.

The price index of farmed products -- including livestock -- shed 1.6 percent on-month in June, due to a base effect stemming from the government’s emergency cash handout in May, which increased the demand for the products. The index for the service sector, meanwhile, gained 0.3 percent on-month in the cited period. Producer prices serve as a key yardstick for future inflation.

Experts have voiced concerns of deflation risks in recent months, as the pandemic led to sharp decline in consumer spending. But the latest reading now indicates that the economy should be cautious of risks tied to inflation as well, they said.

Dovish monetary policies that have increased liquidity and difference between short- and long-term interest rates could now contribute to inflation, according to Meritz Securities analyst Yoon Yeo-sam.

The country’s consumer prices remained flat on-year in June, following a 0.3 percent on-year contraction in May, separate reports released earlier showed.

The BOK has projected the country’s consumer prices to gain 0.3 percent on-year in 2020, missing the country’s long-term target of 2 percent by more than 1 percentage point for a second consecutive year.

By Jung Min-kyung (