Import prices rose for eight straight months through last month, marking the longest climb since the 2008 global financial crisis. Higher international oil prices pushed up prices for mining products and coal and petroleum products. With oil prices climbing more steeply after the U.S. and Israel's airstrikes on Iran at the end of last month, the uptrend in import prices may last longer.
According to the import and export price index the Bank of Korea released on the 17th, the import price index for February this year (provisional, won-based; 2020=100) was 145.39, up 1.1% from the previous month. Import prices have risen for eight consecutive months since July last year (0.8%). This is the longest uptrend since the 12 straight months of increases from August 2007 (0.9%) to July 2008 (1.1%).
By item, materials and supplies rose 3.9%, led by mining products (4.4%). Intermediate goods increased 0.2% as coal and petroleum products (4.8%) climbed. In contrast, capital goods and consumer goods fell 0.1% and 0.2%, respectively. Among detailed items, lead ore (14.3%), jet fuel (10.8%), and crude oil (9.8%) posted sharp gains.
The Bank of Korea (BOK) said import prices were driven higher as international oil prices rose despite a decline in the won-dollar exchange rate. The average international oil price rose 10.4% from $61.97 per Barrel in January this year to $68.4 last month. Over the same period, the won-dollar exchange rate fell 0.5% from 1,456.51 won to 1,449.32 won.
The Bank of Korea (BOK) expects the rise in import prices to continue for the time being. A BOK official said, "From the 28th of last month, when the United States and Israel carried out airstrikes on Iran, to the 13th of this month, the price of Dubai crude rose more than 58%, and the won-dollar exchange rate also climbed 1.4% over the same period," adding, "With international oil prices and the exchange rate rising together, import prices in March are also more likely to increase."
Import prices are generally known to affect consumer prices with a lag of three to six months. If the uptrend in import prices continues, the recent slowdown in consumer prices could also steepen. The consumer price inflation rate (year-over-year) stayed in the low 2% range at 2.4% in October and November last year and 2.3% in December, then recorded 2% in both January and February this year.
On this, a Bank of Korea (BOK) official explained, "The recent surge in international oil prices could be reflected relatively quickly in consumer prices, centering on petroleum products such as gasoline and diesel." However, the official added, "With the maximum oil price system taking effect on the 13th, the magnitude of the increase could be partly limited."
The maximum oil price system is a policy in which the government sets a cap on the retail prices of petroleum products such as gasoline and diesel to curb a sharp rise in oil prices. With international oil prices surging recently due to instability in the Middle East, it was implemented for the first time in about 30 years since 1997. The caps were set at 1,724 won per liter for gasoline and 1,713 won for automotive diesel.
Meanwhile, the export price index for February (won-based) was 148.98, up 2.1% from the previous month. Export prices also extended their rise for eight straight months. This is the longest period since the 11 consecutive months of increases from December 2020 to October 2021.
By item, prices of manufactured goods rose 2.1%, led by coal and petroleum products (7%) and computers, electronics and optical devices (5.4%). Agricultural, forestry and fishery products also climbed 4.8%. Among detailed items, computer memory rose 32.6%, while frozen seafood (8.7%), diesel (8.0%), and ethylene vinyl acetate (6.7%) increased. In contrast, silver bullion (-10.8%) and refined copper products (-2%) fell.