Declines in the prices of primary goods and manufactured products muted South Korea's producer price index (PPI) in May, reported the Bank of Korea on Friday.

The nation's PPI rose a modest 0.3% on year in May, but declined 0.4% from April, reported the central bank.

In May, the agricultural, forestry and marine goods PPI fell 1.7% on year, while the manufactured products PPI declined 0.8%.

In contrast, utility bills (electric power, gas, water and waste) in May rose 4.6% on year, while services rose 2% in the same period, reported the Bank of Korea.

A major deflationary push came from the coal and petroleum products PPI, that declined 9.8% in May on year.

Pushing producer upwards in May were accommodation and food services, gaining 3.5% on year.

South Korea's PPI measures selling prices received by domestic producers at the factory gate, or in billing in business-to-business transactions.

The PPI is distinct from the consumer price index (CPI) that measures prices at retail, faced by ordinary shoppers.

The PPI is considered one precursor to the CPI, as retailers try to recoup costs of operation.

The Bank of Korea also on Friday released its Domestic Supply Index, that measures producer prices by stage of production.

The Domestic Supply Price Index decreased by 1% on year in May led by an 11.1% on-year decline in raw material prices, a 0.6% on-year slip in good and services prices, and a 0.7% on-year fall in final goods and services.

South Korea's CPI rose 1.9% on year in May, just below the Bank of Korea's 2% annual inflation target. The central bank next meets on July 10 to set monetary policy.