Terms of Trade Improve for Two Consecutive Months... Base Effect of International Oil Prices

Bank of Korea Announces 'July Trade Index and Terms of Trade'
Oil Price Rebound May Cause a Decline Going Forward

Due to the base effect of international oil prices, South Korea's terms of trade improved for the second consecutive month.

According to the "Trade Index and Terms of Trade" (based on the dollar) statistics released by the Bank of Korea on the 29th, the net goods terms of trade index in July rose by 5.1% compared to the same month last year. This was because import prices (-16.8%) fell more sharply than export prices (-12.6%). The net goods terms of trade index represents the quantity of goods that can be imported with one unit of exports.

The index rose for two consecutive months after increasing by 0.2% last month for the first time in 27 months. Yuseong Wook, head of the Price Statistics Team at the Economic Statistics Bureau of the Bank of Korea, said the rise in the terms of trade index was largely influenced by the expanded base effect of international oil prices. Regarding the outlook, he said, "Since oil prices are showing a rebound trend, it is difficult to guarantee that they will rise next month."

Last month, the export volume index fell by 3.6% compared to a year ago. It had risen for the first time in four months last month but then turned downward again. By item, computers, electronics, and optical equipment (-7.5), coal and petroleum products (-22.2) decreased, while transportation equipment (6.2) and chemical products (7.2) increased.

The import volume index also fell by 10.7% during the same period, similarly turning downward. Computers, electronics, and optical equipment (-10.1) and mining products (-21.7) decreased, but chemical products (1.0) and electrical equipment (1.3) increased.

Last month, the export value index increased in transportation equipment (10.7) and electrical equipment (4.0), but decreased in computers, electronics, and optical equipment (-26.0) and coal and petroleum products (-41.5), resulting in a 15.8% decline compared to the same month last year.

The import value index also increased in electrical equipment (0.2) but decreased in mining products (-16.5) and computers, electronics, and optical equipment (-14.9), falling 25.7% compared to the same month last year.