July Net Barter Terms of Trade Index Declines for 16 Consecutive Months... "All-Time Low"

Import Prices Rise More Than Export Prices, Worsening Terms of Trade
Largest Decline in 11 Years

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Due to the rise in international oil prices, import prices surged more than export prices last month, causing the net barter terms of trade index to decline for 16 consecutive months, reaching an all-time low. The net barter terms of trade index is the ratio of the price of one unit of export goods to the price of one unit of import goods; a lower index indicates worsening trade terms.

According to the Bank of Korea's announcement on the 31st of the "July Trade Index and Terms of Trade" (based on the dollar, provisional), last month's net barter terms of trade index (82.55) fell 11.4% compared to the same month last year. This is the largest decline since August 2011 (-12.5%). Compared to the previous month, it dropped by 3.1%.

Seo Jeong-seok, head of the Price Statistics Team at the Bank of Korea, explained, "In July, the net barter terms of trade index showed an all-time low as import prices (18.0%) rose more than export prices (4.6%). Although recent declines in international oil prices have affected export and import prices, the fact that international oil prices remain strong compared to the same month last year is reflected in these results."

Last month's import value index was 182.55 (2015=100), up 22.7% from a year earlier. This marks the 20th consecutive month of increase, with the rise (20.4%) larger than in June. While machinery and equipment (-7.7%) decreased, mineral products (70.7%) and computers, electronics, and optical devices (14.3%) rose significantly.

The import volume index (131.55) rose 4.0% year-on-year, reversing to an upward trend as primary metal products (-16.1%) decreased but computers, electronics, and optical devices (23.9%) and mineral products (11%) increased. The import volume index excludes import amounts for ships, weapons, aircraft, artworks, etc., which are excluded from the import price index due to difficulties in price investigation among customs clearance amounts.

The July export value index was 143.16, up 8.1% from a year earlier, marking 21 consecutive months of increase. Although computers, electronics, and optical devices (-2.6%) decreased, coal and petroleum products (83.8%) and transportation equipment (17.1%) increased.

The export volume index (124.97) rose 3.4%, turning upward after a decline the previous month. Chemical products (-4.6%) decreased, but computers, electronics, and optical devices (16.6%) and transportation equipment (18.5%) increased.

The income terms of trade index (103.16), which shows the total quantity of goods that can be imported with the total export amount of South Korea, fell 8.4% compared to a year earlier. This is due to the rise in the export volume index (3.4%) but the decline in the net barter terms of trade index (-11.4%).

Regarding the outlook for terms of trade in August, Team Leader Seo said, "The net barter terms of trade index is calculated based on the same month of the previous year. Even if recent international oil prices and raw material prices have fallen, they have risen compared to the same month last year," adding, "The net barter terms of trade index is expected to maintain its downward trend next month as well."

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