South Korea's producer prices returned to growth in August after a one-month decline, as a heat wave drove up farm product prices and industrial city gas costs rose.
The producer price index rose 0.2% in August from July, according to preliminary data released by the Bank of Korea on the 18th. The index had fallen 0.4% in July before turning higher. Compared with a year earlier, prices were up 7.9%, widening from July's 7.7% gain.
Agriculture, forestry and fishery products led the increase, rising 3.8% from the previous month and pushing up the overall index. The heat wave lifted farm produce prices 4.9% and livestock prices 2.8%.
Spinach surged 51.9% in a single month on poor harvests. Because spinach is a staple ingredient at restaurants and institutional catering operations, a growing number of businesses are dropping it from menus or cutting portion sizes.
Pork, hit by reduced supply, rose 5.4%, while other fish climbed 7.3%.
Energy prices added to the upward pressure. The electricity, gas, water and waste category rose 0.9% from July, driven largely by an 11.0% jump in industrial city gas, which is now 37.8% higher than a year earlier.
Manufactured goods were unchanged from the previous month, as a 0.4% rise in coal and petroleum products offset a 0.7% decline in electrical equipment. Semiconductors rose 1.4% and computers and peripherals gained 6.3%, but an 8.8% drop in wiring harnesses limited the overall movement.
Service prices were flat. Hotel rates rose 6.5% and bakery prices 2.4%, but financial and insurance services fell 1.5% as brokerage commissions declined 3.8% amid falling stock prices. Fresh food prices surged 7.4% in a month, while processed food rose 1.8% and energy 1.0%.
It is worth putting the month's individual moves in order of size. Semiconductors, 1.4%. Pork, 5.4%. Industrial city gas, 11.0%. Spinach, 51.9%. Of the individual items the Bank set out, the largest single movement in the month South Korea's producer prices turned positive again was a leaf.
The index is a weighted average, so a leaf did not lift it on its own. But the direction of a weighted average is argued at the margin, and at the margin this month's argument was won by a vegetable that grows well in cool temperatures and had a difficult summer.
That makes spinach the most informative instrument in the August data. Semiconductors moved 1.4% and reported on global demand. Spinach moved 51.9% and reported on the weather, which is also what most of the rest of the table was responding to.
Analysts looking for a leading indicator of Korean food inflation have traditionally watched rice and pork. On August's evidence the sensitive instrument is the one with the shortest patience for heat, the shortest run to market and a price quoted daily.
The Department of Unnecessary Research accordingly proposes that the Bank of Korea publish it separately: a single-vegetable index, seasonally unadjusted, reported to one decimal place, as a direct read-out of the Korean summer.
Restaurants are already trading on it. They have reduced their positions to a smaller portion.