S. Korea's producer prices log first drop in 7 years in May

By Park Bo-ram
SEOUL, June 9 (Yonhap) -- South Korea's producer prices fell in May for the first
time in almost seven years as a strengthening local currency sharply reduced
prices for imported goods, the central bank said Tuesday.
The producer price index, a barometer of future consumer price growth, declined
1.3 percent in May from a year earlier, compared with an annual 1.5 percent gain
the previous month, the Bank of Korea (BOK) said in a report. Compared with
April, the prices also dropped 0.8 percent.
The May figure marks the first annual contraction since a drop of 0.1 percent in
August 2002, the BOK said.
Annual growth in producer prices has slowed since July last year when it hit a
10-year high of 12.5 percent, mainly fanned by soaring oil prices.
"The fall in May came as a strong won pushed down prices of imported materials
and goods," said a BOK official. "Stagnant local demand stemming from an economic
slowdown was also responsible."
The South Korean won has gained 25 percent against the U.S. dollar since it
dipped to an 11-month-low against the greenback in early March.
The drop in producer prices, combined with budding signs of an economic recovery,
is widely expected to lead the central bank to leave its key interest rate at the
current record low of 2 percent this week. The BOK is scheduled to hold an
interest rate-setting meeting on Thursday.
Between October and February, the BOK slashed the rate by a total of 3.25
percentage points to kick-start the sagging economy.
pbr@yna.co.kr
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