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 Hi

Import prices have fallen for the third consecutive month on a month-over-month basis. While international oil prices have surged again, the decline in the won-dollar exchange rate has resulted in a significant adjustment in import prices. Compared to the same period last year, the rate of increase in import prices dropped from above 20% to 15.6% last month, but since international oil prices are once again on the rise, there remains cautiousness about upward pressure on import prices. Nevertheless, the terms of trade, which indicate the country's external purchasing power, have improved each month to a record-high extent.

According to the "Export and Import Price Index and Trade Index (Preliminary) for August 2026" released by the Bank of Korea on the 15th, last month's import price index in won terms was 156.31 (2020=100), down 2.4% from the previous month. Due to the aftermath of the Middle East war, import prices had soared by 18.0% month-over-month in March, but then fell by 2.1% in April, saw a slight increase in May (0.2%), and then fell by 4.2% and 1.0% in June and July, respectively. Last month, prices dropped again by 2.4%, marking a three-month streak of declines.

Although international oil prices, which heavily influence import prices, rose, the decline in the won-dollar exchange rate played a key role. Last month's average monthly price of Dubai crude oil was $88.75, up 15.6% from the previous month ($76.75). Meanwhile, the August won-dollar exchange rate fell by 6.1% to 1,406.30 won, down from 1,497.43 won in the previous month. This led to a decline mainly in chemical products and primary metal products.

However, on a year-over-year basis, import prices still rose significantly (15.6%) due to the increase in prices of mineral products, coal and petroleum products, and others. The rate had exceeded 20% from March through June, when the Middle East war began, then fell to 18.7% in July and 15.6% in August, but remains at a high level.

By use category, raw materials prices rose, while those for intermediate goods, capital goods, and consumer goods declined. Raw materials prices were up 1.5% month-over-month, led by a 2.1% rise in mineral products due to rising crude oil prices. In contrast, only coal and petroleum products (e.g., Bunker C oil, jet fuel) among intermediate goods saw an increase (3.6%), while primary metal products like refined aluminum (-4.2%), computer, electronic, and optical devices such as system semiconductors (-5.3%), electrical equipment including secondary batteries (-5.6%), and machinery and equipment such as bearings (-4.8%) all registered drops, resulting in a 4.0% month-over-month fall for the intermediate goods category. Capital goods and consumer goods prices also fell by 4.2% and 4.4% respectively from the previous month. In contrast, import prices in contractual currency terms excluding August’s exchange rate effects rose by 3.2% from a month earlier. Year-over-year, they increased by 14.7%.

Lee Heung-hoo, Head of the Price Statistics Team, Economic Statistics Department 1 at the Bank of Korea, stated, "As of the 11th of this month, although the exchange rate has dropped by 3.7%, international oil prices have risen by 23.8%, so both upward and downward factors for import prices are present. Given the current Middle East war, there is significant uncertainty regarding international oil prices." He added, "The year-over-year increase in international oil prices has expanded significantly, so the high double-digit growth rate in import prices is likely to continue this month."

Last month's export price index was 183.23, down 3.7% from the previous month. This marked the sharpest decline in three years and eight months, since December 2022 (-6.1%). The decrease mainly resulted from lower prices for most items, particularly chemical products, due to the falling won-dollar exchange rate. However, on a year-over-year basis, export prices jumped by 42.4%. For manufactured goods, prices for all items except for coal and petroleum products (e.g. diesel, jet fuel, up 0.3%) declined: textile and leather products (-5.6%), chemicals (-5.3%), primary metal products (-4.9%), computer/electronic/optical devices (-3.1%), electrical equipment (-5.8%), machinery and equipment (-4.7%), and transport equipment (-5.4%), falling 3.7% from the previous month. Agricultural, forestry, and fishery products also declined by 2.0% due to lower prices for frozen seafood (-2.6%). However, in August, export prices in contractual currency terms rose by 2.2% from the previous month and surged by 41.0% year-on-year.

The export volume index, which tracks changes in export and import activity, rose 25.9% compared to the same month last year, driven by increases in semiconductors, computer memory devices, mobile phones, and other computer, electronic, and optical equipment, as well as chemical products like basic inorganic chemicals and cosmetics. This upward trend has continued for 10 months. The export amount index soared by 75.8%. Likewise, the import volume index rose by 12.0% year-on-year, boosted by semiconductors, computers, other IT devices, as well as machinery for semiconductor manufacturing and equipment. The import amount index climbed by 23.1%. Lee noted, "While the rise in oil prices will impact export prices for petrochemical products, the favorable trend in export prices for semiconductors, computers, and optical devices suggests that conditions in the semiconductor industry will be especially important going forward."

The net barter terms of trade index rose by 27.1%, marking the highest year-over-year growth since the system was established in 1988. This was because export prices (applying a time lag, up 39.6%) outpaced import prices (up 9.9%) by a wide margin. The net barter terms of trade index indicates, based on the reference year (2020=100), how much product can be imported per unit of export value. Lee explained, "The rise in export prices has widened, led by semiconductors, while the increase in import prices for mineral products and others remained at the previous month's level, thus expanding the net barter terms of trade index."

The income terms of trade index, which shows how much can be imported by the export total compared to the reference year (2020=100), rose by 60.0%, as both the net barter terms of trade index (up 27.1%) and the export volume index (up 25.9%) increased. This is also the highest year-over-year growth since 1988, when the index was established. Lee emphasized, "With both the net barter terms of trade and income terms of trade indices, which gauge external purchasing power, reaching record-high growth rates, it can be assessed that the trend of improvement in terms of trade has continued."

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