□ Producer Price Index rose by 0.1% month-on-month in October 2010 (Year-on-year : 5.0%).
o Prices of agricultural, forest and marine products :
-7.1%(Month-on-month), 29.5%(Year-on-year)
o Prices of industrial products : 0.4%(Month-on-month), 4.8%(Year-on-year)
o Prices of Electricity, water & gas :
0.2%(Month-on-month), 3.5%(Year-on-year)
o Prices of services : 0.4%(Month-on-month), 1.6%(Year-on-year)
Producer Price Index
(rate, %)
Weight month-on-month year-on-year
'10 Jul Aug Sep Oct '10 Jul Aug Sep Oct
Total 1000.0 0.1 0.3 1.0 0.1 3.4 3.1 4.0 5.0
Agricultural, forest & marine
products 43.6 1.5 4.5 16.0 -7.1 -0.5 7.1 29.6 29.5
Industrial
products 644.8 0.0 0.0 0.3 0.4 4.7 3.7 3.6 4.8
Electricity,
water & gas 44.5 0.1 1.3 1.7 0.2 0.8 2.0 3.7 3.5
Services 264.4 0.2 0.1 0.0 0.4 1.4 1.3 1.2 1.6
Producer Price Index during October 2010
A. Producer Price Index
B. Changes
(Appendix)
Compiling of Producer Price Index
1. Definition and Use
― The purpose of the producer price index is to measure fluctuation of prices for some services and all goods produced in Korea that are traded between businesses in the first transaction stage in the domestic market. The PPI is used to grasp the supply-demand conjuncture, to judge business trends and to deflate nominal terms.
2. Frequency
― Once a month for goods and services. Three times a month for agricultural, forestry and marine products.
3. Prices surveyed : Prices of producers (Factory prices
)4. Target Items
― For goods and services, the transaction amount of an individual item in the domestic market should be more than 1/10,000 (66.4 billion won) of the total transaction amount and 1/2,000 (119.5 billion won), respectively. Furthermore, each target item should represent its kind to present true price fluctuations. Currently, the number of target items is 884 (801 goods and 83 services).
5. Ways of compiling statistics
― Classificationㅇ Basic classification : There are two categories of goods and services. With the two categories, there are twelve sub-categories;
agricultural, forestry & marine products, mining products;
manufacturing industry products; electric power, water & gas supply; transportation; communications; financial services; real estate agencies & rents; leasing and renting; advertising, legal, engineering and computer-related services; and other services.
ㅇ Specialized classification : Foods & non-foods; fresh foods &
items other than fresh foods; energy & items other than energy;
information technology & items other than information technology; and the PPI excluding fresh foods & energy.
― Weight : Ratio of the transaction amount of a selected item and items similar to that selected to the total amount as a permillage, which shows the level of its economic importance.
No. of Items and Weight of Each PPI Category (as of 2005)
Category # of items Weight
Total Index 884 1,000.0
Ba sic
Commodities 801 735.6
Agricultural, forest & marine products 55 43.6
Mining products 9 2.7
Manufacturing industry products 728 644.8 Electric power, water & gas supply 9 44.5
Services 83 264.4
Sp eci aliz
ed
Foods 131 81.3
Excluding foods 753 918.7
Fresh foods1) 34 16.4
Excluding fresh foods 850 983.6
Energy 20 93.8
Excluding energy 864 906.2
I T 98 175.1
Excluding I T 786 824.9
PPI less fresh foods & energy 830 889.8 1) Fresh Vegetables(15 items), Fresh Fruits(8 items), Marine Foods(11 items)
― Formula: Weighted arithmetic mean formula at a base time (Laspeyres formula) that measures price changes with the weighted transaction amount as of the base year.
― Quality adjustment method: The direct comparison method, linking method, production cost method, or overlap method are generally adopted. The Hedonic regression method is applied to products such as PCs whose quality can be measured in objective quantitative value.
― Base year : The base year for the current index is 2005. The base year is revised every five years to reflect changes in the economic structure and improve the way of selecting target items and the weight structure.
6. Notes
― The purpose of any price index is to measure changes of prices and not to present an absolute price level.
― Prices of agricultural, forestry & marine products are those decided after a bidding process in a wholesale market rather than farmer's or fishermen's selling prices.
― PPI can be compared with the consumer price index (CPI), but cannot be used to measure margins at the stages of producer and retail sales.
