April Terms of Trade Index Falls for the First Time in 13 Months... Impact of Rising Raw Material Prices

Bank of Korea 'April 2021 Trade Index and Terms of Trade'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Last month, the terms of trade fell compared to the same month last year for the first time in 13 months. This was due to the sharp rise in raw material prices, causing import prices to increase more than export prices. However, both export and import volume and value indices continued to show an upward trend.

According to the "April 2021 Trade Index and Terms of Trade" released by the Bank of Korea on the 26th, the "net barter terms of trade index," which indicates the quantity of imports that can be purchased with the money earned from exporting one unit of goods, stood at 94.33 (2015=100), down 0.6% from the same month last year. This decline after 13 months was due to import prices rising 18.7%, outpacing export prices which rose 18.0%, thereby worsening the terms of trade. A net barter terms of trade index of 94.33 means that with the money earned from exporting 100 goods, about 94 goods can be imported.

Kim Young-hwan, head of the Price Statistics Team at the Economic Statistics Bureau of the Bank of Korea, said, "Although export prices also rose significantly by 18%, the terms of trade index fell because import prices increased even more," adding, "This is related to the sharp rise in oil and raw material prices."

Although the terms of trade worsened due to higher import prices, both export and import price and volume indices continued their upward trend. This is because the global economy improved compared to last year, which was impacted by the COVID-19 shock.

Last month, the export volume index (118.64) rose 20.3% compared to the same month last year, marking the eighth consecutive month of increase, and the export value index (123.49) rose 42.0%, continuing its upward trend for six months. By export value, coal and petroleum products (98.5%), transportation equipment (81.1%), chemical products (52.0%), and textiles and leather products (50.3%) increased significantly, while by export volume, transportation equipment (76.7%) and textiles and leather products (44.7%) surged.

The import value index (140.99) also jumped 34.1% compared to a year ago, and the import volume index (127.77) rose 13%, continuing an eight-month consecutive upward trend. By item, the import value and volume indices for coal and petroleum products rose sharply by 126.2% and 22.7%, respectively, and machinery and equipment also increased by 49.7% and 44.2%, respectively.

Meanwhile, the "income terms of trade index," which indicates the total quantity of goods that can be imported with the total export value, rose 19.6% year-on-year, marking the 11th consecutive month of increase, as the net barter terms of trade index (-0.6%) declined but the export volume index (20.3%) rose.

This content was produced with the assistance of AI translation services.