Import Prices Fall for Third Consecutive Month... Terms of Trade Hit Record Improvement for Second Straight Month

August Import Prices Drop 2.4% from Previous Month
Impact of Won-Dollar Decline Offsets Rising International Oil Prices
Export Prices Also Down 3.7%, Marking Largest Decline Since Late 2022
Net Barter and Income Terms of Trade Growth Hit Highest Rate Since 1988
Bank of Korea: "Improvement in Terms of Trade Continues"

Import prices have declined for a third consecutive month on a month-over-month basis. While international oil prices rose sharply again, the decline in the won-dollar exchange rate caused a substantial adjustment. Compared to the same period last year, the import price growth rate, which was above 20%, dropped to 15.6% last month. However, as international oil prices are once again rising, there are ongoing concerns about upward pressure on import prices. On the other hand, the improvement in the terms of trade, an indicator of our economy’s external purchasing power, reached the highest level on record and continues to improve each month.

According to the “Export/Import Price Index and Trade Index (Preliminary) for August 2026” released by the Bank of Korea on the 15th, the import price index in won terms fell by 2.4% month-over-month last month, reaching 156.31 (2020=100). After surging 18.0% in March compared to the previous month due to the impact of the Middle East war, the import price index dropped 2.1% in April, saw a slight uptick in May (0.2%), then declined by 4.2% and 1.0% in June and July, respectively. It continued its decline by another 2.4% last month, marking three consecutive months of decreases.

Although international oil prices, which significantly affect import prices, increased, the decline in the won-dollar exchange rate was a major factor. The average monthly price of Dubai crude oil last month was $88.75, up 15.6% from $76.75 the previous month. In August, the won-dollar exchange rate dropped by 6.1% to 1,406.30 won, compared to 1,497.43 won the previous month. As a result, there was a downward trend mainly in chemical and basic metal products.

However, compared to the same month last year, import prices still posted a significant increase of 15.6% due to rising prices of mineral products, coal, and petroleum products. While the import price growth had exceeded 20% from March to June, when the Middle East war broke out, it declined to 18.7% in July and 15.6% in August, but remains at a high level.

By usage, raw materials increased, while intermediate goods, capital goods, and consumer goods fell. Due to the rise in crude oil prices, raw materials, particularly mineral products (2.1%), increased by 1.5% month-over-month. Conversely, among intermediate goods, only coal and petroleum products like Bunker C oil and jet fuel (3.6%) rose, while basic metal products such as refined aluminum (-4.2%), computers, electronic and optical devices such as system semiconductors (-5.3%), electrical equipment such as secondary batteries (-5.6%), and machinery and equipment such as bearings (-4.8%) declined, resulting in a 4.0% month-over-month decrease in intermediate goods. Capital goods and consumer goods also fell by 4.2% and 4.4% respectively from the previous month. In contrast, the import price index based on contract currency, which excludes August’s exchange rate effect, was up 3.2% from the previous month and up 14.7% compared to the same month last year.

Lee Heunghoo, Head of Price Statistics Team at the Economic Statistics Department 1 of the Bank of Korea, stated, “From the start of this month until the 11th, the exchange rate has fallen by 3.7%, but international oil prices have risen by 23.8%, resulting in both upward and downward factors for import prices. The situation in the Middle East is creating substantial uncertainty for international oil prices.” He added, “Given the significant increase in international oil prices compared to the same month last year, there is a high likelihood that the double-digit growth rate for import prices will continue this month.”

Last month’s export price index also fell to 183.23, down 3.7% from the previous month, marking the largest drop in three years and eight months since December 2022 (-6.1%). Due to the effect of the lower won-dollar exchange rate, export prices declined for most items, mainly chemical products. However, compared to the same month last year, export prices surged 42.4%. For manufactured goods, except for coal and petroleum products like diesel and jet fuel (0.3%), all items declined: textiles and leather products (-5.6%), chemical products (-5.3%), basic metal products (-4.9%), computers, electronic and optical devices (-3.1%), electrical equipment (-5.8%), machinery and equipment (-4.7%), and transport equipment (-5.4%), resulting in an overall 3.7% month-over-month decrease. Export prices of agricultural, forestry, and marine products also fell by 2.0% from the previous month, led by frozen seafood (-2.6%). However, export prices based on contract currency increased by 2.2% month-over-month in August and surged by 41.0% compared to the previous year.

The export volume index, which shows the changing situation of exports and imports, rose by 25.9% year-over-year, mainly due to increases in computers, electronic and optical devices such as semiconductors, computer memory, and mobile phones, as well as chemical products like basic inorganic compounds and cosmetics. This marks a tenth consecutive month of increases. The export value index jumped 75.8% in the same period. Meanwhile, the import volume index rose 12.0% year-over-year, led by growth in computers, electronic and optical devices such as semiconductors and computers, as well as machinery and equipment for semiconductor manufacturing. The import value index was up by 23.1%. Lee commented, “While rising oil prices may affect export prices in petrochemical products, the export prices for semiconductors, computers, and optical devices are trending positively, so the semiconductor market will be even more important.”

The Net Barter Terms of Trade Index rose by 27.1%, marking the highest year-over-year growth since the introduction of the index in 1988. This was because export prices (lag-adjusted, up 39.6%) rose much more than import prices (up 9.9%). The Net Barter Terms of Trade Index measures, in index form (2020=100), the amount of imported goods that can be purchased per unit value of exports. Lee explained, “The increase in export prices, led mainly by semiconductors, widened, while the rise in import prices for items such as mineral products remained at last month’s level, further expanding the growth of the Net Barter Terms of Trade Index.”

The Income Terms of Trade Index, which shows how much the volume of imports financed by total exports has increased compared to the base period (2020=100), jumped 60.0%, as both the Net Barter Terms of Trade Index (27.1%) and the export volume index (25.9%) rose. This is also the highest year-over-year increase since the index began in 1988. Lee concluded, “The growth rates of the Net Barter Terms of Trade Index and the Income Terms of Trade Index, which can be used to gauge external purchasing power, have reached record highs, indicating that the terms of trade are steadily improving.”

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