Import Prices Fall for Second Month... Net Barter Terms of Trade Show Record Improvement

Import Prices Drop 1.0% in July Compared to Previous Month
Declines in Oil Prices and Exchange Rates Lead to Downturn in Coal, Petroleum, and Primary Metal Products

Improvement in Terms of Trade Continues, Driven by Higher Export Prices and In

Import prices have declined for two consecutive months compared to the previous month. After surging by 18.0% in March due to a spike in international oil prices, import prices have since undergone a correction. However, compared to the same period last year, import prices continue to show an increase of nearly 20%, maintaining ongoing concerns regarding risks stemming from import prices. Experts have pointed out that, depending on the category, these prices could exert upward pressure on consumer prices with either a short or long time lag. Meanwhile, terms of trade, which measure the external purchasing power of the Korean economy, continued to improve.

According to the “Export and Import Price Index and Trade Index (Preliminary) for July 2026,” released by the Bank of Korea on the 14th, last month's won-based import price index stood at 160.09 (2020=100), down 1.0% from the previous month. Triggered by the Middle East conflict in March, import prices had soared 18.0% on a monthly basis, but then fell by 2.1% in April, saw a marginal rise of 0.2% in May, and subsequently declined by 4.2% in June and 1.0% in July, resuming their downward trend.

This trend is attributable to declines in both international oil prices and the won-dollar exchange rate, which significantly affect import prices. As a result, coal and petroleum products, as well as primary metal products, drove the overall decline. Last month, the average price of Dubai crude dropped by 3.4% to $76.75 per barrel, down from $79.45 in June. Additionally, the average won-dollar exchange rate in July fell to 1,497.43 won, compared to 1,527.30 won in June.

Nevertheless, compared to the same month last year, import prices—particularly for mineral products and chemical products—remained sharply higher, rising by 18.7%. Since the onset of the Middle East conflict in March, year-on-year import prices have consistently exceeded 20%. In July, although the increase was slightly lower at 18.7%, it remains at a high level.

By category, prices for raw materials rose, whereas prices for intermediate goods and capital goods declined. While crude oil prices fell, the price of natural gas climbed, resulting in a 0.8% monthly increase in raw material prices, driven primarily by mineral products (0.9%). In contrast, prices for intermediate goods fell by 2.2% on a monthly basis, due to decreases in coal and petroleum products (such as propane gas and bunker-C fuel oil, -3.9%) and primary metal products (such as refined aluminum, -3.8%). Capital goods and consumer goods prices also declined by 1.8% and 0.1%, respectively, compared to the previous month.

Import prices based on contract currency, excluding the exchange rate effect in July, increased by 0.9% from the previous month. Year-on-year, they climbed by 10.4%.

Lee Heunghoo, head of the Price Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, said, "The average exchange rate from the 1st to the 12th of this month fell by 5% compared to the previous month's average. However, international oil prices have risen by 7.3%, resulting in both upward and downward factors for import prices." He added, "We need to observe more closely to determine the direction of import prices this month." Still, he analyzed that given import prices remain significantly higher year-on-year, they are likely to exert upward pressure on consumer prices after some delay.

Last month, the export price index stood at 190.65, up 1.0% from the previous month. Although the won-dollar exchange rate declined, prices for computers, electronic and optical devices, and coal and petroleum products rose, contributing to the increase. Compared to a year ago, the index jumped 49.1%, marking the highest growth in 28 years and four months since March 1998 (57.1%).

Among manufactured goods, prices for computers, electronic and optical devices (up 4.8%) and coal and petroleum products such as naphtha and diesel (up 4.8%) increased, leading to a 1.1% rise over the previous month. In contrast, prices for agricultural, forestry, and fisheries products fell by 1.7% over the previous month, primarily due to a 2.1% drop in frozen marine products. The export price index based on contract currency in July increased by 3.0% from the previous month, and by 37.8% year-on-year.

The Export Volume Index, which tracks changes in export and import volumes, rose 20.0% year-on-year thanks to increases in semiconductors, computer memory, mobile phones (i.e., computers, electronic and optical devices), as well as passenger cars and other transportation equipment. This marked the ninth consecutive month of growth. The Export Value Index soared by 64.2%. Over the same period, the Import Volume Index climbed by 14.7%, mainly due to increases in semiconductors, computers (computers, electronic and optical devices), and machinery and equipment for semiconductor manufacturing. The Import Value Index surged by 25.8%.

The Net Product Terms of Trade Index increased by 24.7%, recording the highest year-on-year growth rate ever. This was due to a much larger jump in export prices (with a lag, 36.8%) compared to import prices (9.7%). The Net Product Terms of Trade Index quantifies, relative to the base period (2020=100), the amount of goods that can be imported with unit export proceeds. Lee explained, "Export prices saw a slightly greater increase, while import prices rose at a slower pace due to falling international oil prices and exchange rates, leading to an expanded improvement in the terms of trade."

The Income Terms of Trade Index, which measures the increase in the volume of goods that can be imported with export proceeds compared to the base period (2020=100), rose by 49.7% as both the Net Product Terms of Trade Index (24.7%) and the Export Volume Index (20.0%) advanced. Lee pointed out, "The continued improvement in the terms of trade is due to the simultaneous rise in both export prices and export volumes," adding, "This indicates that the export competitiveness of Korean companies has been strengthened."

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