South Korea's net barter terms of trade index posted its largest ever month-on-month gain in July, as export prices surged — led by semiconductors — while the pace of import price increases slowed. The result signals stronger export competitiveness for Korean companies and an improvement in the country's external purchasing power. Import prices fell for a second consecutive month, weighed down by lower international oil prices and a falling won-dollar exchange rate.
According to preliminary data on export and import price indexes and trade indexes for July 2026, released by the Bank of Korea on Friday, import prices in won terms fell 1 percent from the previous month, extending June's 4.2 percent decline to a second straight monthly drop. Compared with the same month a year earlier, import prices were up 18.7 percent, though the pace of increase eased from June's 20.9 percent.
The monthly average price of Dubai crude came in at $76.80 per barrel in July, up 3.4 percent from $79.50 in June. Over the same period, the won-dollar exchange rate fell 2 percent, from 1,527.3 won to 1,497.4 won.
Breaking down import prices by end use, raw material prices rose 0.8 percent month-on-month, driven mainly by a 0.9 percent gain in mining products — natural gas surged 24.8 percent, offsetting a 4.8 percent drop in crude oil. Intermediate goods fell 2.2 percent, pulled down by declines in propane gas (minus 25.2 percent), bunker C oil (minus 7.8 percent) and other coal and petroleum products (minus 3.9 percent), as well as refined aluminum (minus 8.4 percent) and other primary metal products (minus 3.8 percent). Capital goods and consumer goods fell 1.8 percent and 0.1 percent, respectively, from the prior month.
On the August outlook, Lee Heung-hu, head of the Bank of Korea's price statistics team, said the average exchange rate from Aug. 1 to Monday had fallen about 5 percent from the previous month. "International oil prices have risen about 7.3 percent from the previous month amid heightened tensions in the Middle East, so upside and downside factors are currently mixed," he said.
The export price index rose 1 percent month-on-month in July, as gains in computers, electronics and optical equipment and in coal and petroleum products outweighed the drag from the weaker won-dollar rate. The index reversed a two-month decline — it had last risen in May, up 0.4 percent — to record its highest monthly gain since April's 7.5 percent increase. Year-on-year, export prices surged 49.1 percent, the largest annual increase since March 1998, when they rose 57.1 percent — a gap of 28 years and four months.
By product category, manufactured goods rose 1.1 percent month-on-month, driven by computers, electronics and optical equipment including semiconductors (up 4.8 percent), naphtha (up 6.2 percent) and diesel (up 11.2 percent), with coal and petroleum products overall up 4.8 percent. Agricultural, forestry and fishery products fell 1.7 percent, dragged down by a 2.1 percent drop in frozen seafood.
Turning to trade volume indexes, the export volume index rose 20 percent year-on-year in July, lifted by increases in computers, electronics and optical equipment and in transportation equipment — marking nine consecutive months of gains. The export value index climbed 64.2 percent over the same period.
The import volume index rose 14.7 percent year-on-year, driven by increases in computers, electronics and optical equipment and in machinery and equipment. The import value index rose 25.8 percent.
The net barter terms of trade index — which measures how many units of imports can be purchased per unit of exports — rose 24.7 percent year-on-year in July, as export prices climbed 36.8 percent while import prices rose 9.7 percent. That is the highest annual gain on record. Lee attributed the improvement to a widening gap between export and import price movements. "The pace of export price increases expanded slightly, while falling international oil prices and a lower exchange rate compressed the rise in import prices, broadening the improvement," he said. "The sustained improvement in the terms of trade reflects the simultaneous rise in export prices and increase in export volumes." He added that the trend "suggests Korean companies' export competitiveness has strengthened," and that "since the terms of trade serve as a gauge of our economy's external purchasing power, we can assess that external purchasing power is also improving."
The income terms of trade index — which measures the volume of imports that can be financed by total export revenue — rose 49.7 percent year-on-year in July, as both the net barter terms of trade index (up 24.7 percent) and the export volume index (up 20 percent) advanced.
kimstar@heraldcorp.com
