Export Prices See Largest Drop in 13 Years and 8 Months Due to Weak Demand and Currency Depreciation

December Export Prices Fall 6.0%, Import Prices Fall 6.2%

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Last month, the export price index fell the most in 13 years and 8 months due to the combined effects of the decline in the won-dollar exchange rate and weak global demand. The import price index also continued its downward trend for the second consecutive month, influenced by the exchange rate and the drop in international oil prices.

According to the Bank of Korea on the 13th, the December export price index (based on the Korean won) fell 6.0% compared to the previous month. The month-on-month decline was the largest in 13 years and 8 months since April 2009 (-6.1%). This was due to the fall in coal and petroleum products, chemical products, etc., amid the decline in the won-dollar exchange rate.

The export price based on contract currency, which limits the exchange rate effect, fell 1.5% compared to the previous month. Last month, the average won-dollar exchange rate was 1,296.22 won, down 5.0% from the previous month (1,364.10 won).

Last year, export prices rose 16.6% compared to the previous year, and based on contract currency, they increased by 5.2% year-on-year.

The Bank of Korea explained, "The decline rate of the export price index based on the won in December last year (-6.0%) was the highest since April 2009 (-6.1%)," and "The annual increase rate of the export price index based on the won last year, 16.6%, was the highest since 2008 (21.8%)."

Agricultural, forestry, and fishery products fell 2.1% compared to the previous month, and manufactured goods, centered on coal and petroleum products, chemical products, computers, electronics, and optical devices, fell 6.0%. By item, diesel (-15.5%), cotton yarn (-15.3%), jet fuel (-14.5%), gasoline (-12.4%), ethylene vinyl acetate (-12.4%), xylene (-10.3%), DRAM (-6.1%), and system semiconductors (-5.3%) declined.

The import price index (based on the Korean won) fell 6.2% compared to the previous month, the largest drop in 7 years and 11 months since January 2015 (-7.5%). Import prices had continued to rise in September and October but turned downward in November, showing a decline for two consecutive months.

Due to the decline in the won-dollar exchange rate and international oil prices, mining products, coal, and petroleum products fell, resulting in a 6.2% decrease compared to the previous month. However, compared to the same month last year, it rose 9.1%. The import price based on contract currency, which limits the exchange rate effect, fell 2.0% compared to the previous month.

The monthly average price of Dubai crude oil fell 10.5%, from $86.26 per barrel in November to $77.22 last month.

Last year, import prices rose 25.9% compared to the previous year, and based on contract currency, they increased by 14.1% year-on-year.

The Bank of Korea said, "The decline rate of the import price index in December (-6.2%) was the largest since January 2015 (-7.5%)," and "The annual increase rate of the import price index based on the won last year, 25.9%, was the highest since 2008 (36.2%)."

Raw materials, centered on mining products, fell 9.9% compared to the previous month, and intermediate goods, including coal and petroleum products and chemical products, fell 4.7%. Capital goods and consumer goods fell 2.9% and 3.0%, respectively, compared to the previous month. By item, chicken (-17.2%), crude oil (-14.9%), jet fuel (-14.7%), xylene (-11.4%), naphtha (-10.6%), and ammonia (-8.0%) declined.