Terms of trade show decline for a 9th straight month

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Terms of trade show decline for a 9th straight month

Korea’s terms of trade deteriorated for the ninth consecutive month in August mainly because of higher crude oil prices, according to central bank data released Friday.

The terms of trade index for products was 93.96 last month, down 9.1 percent from a year earlier, according to the preliminary data from the Bank of Korea.

The terms of trade index is the ratio of export prices to import prices, and so measures the amount of imports a country can purchase for each unit of exports.

The index for Korea has been on a decline since December and has stayed below the break-even mark of 100 for nine months in a row.

An index number of more than 100 means that the country is paying for its imports and accumulating capital as well; below 100, the country has to make up the difference from sources other than exports to finance its foreign purchases.

The drop in the trade terms index is attributable to rising oil prices, according to the BOK. Korea imports most of its crude oil, The cost of those purchases, the bank said, has offset solid export growth.

The price of Dubai crude, Korea’s benchmark, soared 53.7 percent August-to-August, to $73.12.

The income terms of trade, which gauge the import purchasing power of a nation’s exports, went up 1.1 percent year-on-year to 148.75 last month.

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