The Import Price Index Turns Downward for the First Time in 25 Months
[Asia Economy Reporter Seo So-jeong] Last month, South Korea's export value index fell by more than 12% compared to a year earlier. The import value index also dropped by over 2%, marking a decline for the first time in 25 months. As export prices fell more sharply than import prices, the terms of trade worsened for the 21st consecutive month.
According to the 'December Trade Index and Terms of Trade' (based on the dollar) statistics released by the Bank of Korea on the 31st, last month's export value index decreased by 12.2% compared to a year earlier. This marks a decline for three consecutive months following October (-6.6%) and November (-11.5%), with the rate of decline also increasing from the previous month (-11.5%).
By item, coal and petroleum products (21.0%) and transport equipment (16.4%) increased, while computers, electronics, and optical devices (-27.4%), primary metal products (-21.1%), textiles and leather products (-17.4%), and chemical products (-16.0%) decreased.
The export volume index also fell by 6.3% year-on-year, showing a decline for three consecutive months. Textiles and leather products (-16.4%), chemical products (-7.9%), and computers, electronics, and optical devices (-7.7%) saw significant decreases.
The December import value index and import volume index decreased by 2.4% and 1.1%, respectively, compared to a year earlier. The import value index declined for the first time in 25 months, and the import volume index for the first time in 6 months.
The import value index rose in mining products (19.9%) but fell in primary metal products (-29.5%) and computers, electronics, and optical devices (-14.2%), resulting in a 2.4% year-on-year decline.
The export-import value index is a measure calculated by dividing the export-import value at the given time (in dollars) by the export-import value at the base period (2015). The export-import volume index is derived by dividing this export-import value index by the export-import price index.
The net commodity terms of trade index fell by 4.9% compared to a year earlier, marking a decline for 21 consecutive months. Export prices (-6.2%) fell more sharply than import prices (-1.4%), worsening the terms of trade.
The net commodity 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, indicating how much import volume South Korea can obtain per unit of export.
The income terms of trade index fell by 11% over the same period, declining for 11 consecutive months. This is because both the export volume index (-6.3%) and the net commodity terms of trade index (-4.9%) decreased last month. The income terms of trade index shows the total volume of goods that can be imported with South Korea's total export value.
Last year, the net commodity and income terms of trade indices fell by 8.1% and 6.6%, respectively, compared to the previous year. Seojeong-seok, head of the price statistics team at the Bank of Korea, explained, "Last year's annual net commodity terms of trade index recorded the lowest level since statistics compilation began in 1988," adding, "The annual decline in the net commodity terms of trade index last year (-8.1%) was the largest since 2011 (-11.0%)."
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