Terms of trade improve for the first time in 27 months... Imports decrease more than exports

'July Trade Index and Terms of Trade'
Base Effect of International Oil Prices, Slowdown in Semiconductor Price Decline

Last month, South Korea's terms of trade improved for the first time in 2 years and 3 months. This was due to imports decreasing more than exports.

According to the 'Trade Index and Terms of Trade' (based on the dollar) statistics released by the Bank of Korea on the 27th, the net goods terms of trade index rose by 0.2% compared to the same month last year. This was influenced by import prices (-15.7%) falling more than export prices (-15.5%). The net goods terms of trade index represents the quantity of goods that can be imported with one unit of exports.

Seo Jeong-seok, head of the Price Statistics Team at the Economic Statistics Bureau of the Bank of Korea, said regarding the rise in the terms of trade index, "There is an effect of the base effect expansion of international oil prices and a slowdown in the decline of semiconductor prices."

Last month, the export volume index increased by 7.5% compared to a year ago, marking a rise after 4 months. By item, computer, electronic and optical equipment (-2.6) and coal and petroleum products (-2.5) decreased, but transport equipment (37.4) and chemical products (10.7) increased.

The import volume index also rose by 4.4% during the same period, returning to an upward trend after 4 months. Computer, electronic and optical equipment (-9.4) and primary metal products (-7.2) decreased, but transport equipment (50.6) and mining products (4.9) increased.

Last month, the export value index fell by 9.2% year-on-year as transport equipment (41.5) and electrical equipment (15.0) increased, but computer, electronic and optical equipment (-25.0) and coal and petroleum products (-40.2) decreased.

The import value index also declined by 12% year-on-year, with increases in transport equipment (46.8) and electrical equipment (7.8), but decreases in mining products (-23.8) and computer, electronic and optical equipment (-15.8).

Regarding the outlook, Seo said, "In import prices, the base effect of international oil prices is strongly evident, but looking only at July, oil prices appear to be rebounding," adding, "It is necessary to closely monitor the future trends of international oil prices and the global economic flow and their impact on export-import goods and terms of trade."

[Image source=Yonhap News]

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