Import and export prices drop due to falling oil prices

Containers stacked up at a port in Busan on Monday. [NEWS1]

Import and export prices dropped in May, ending a three-month rise due to falling global oil prices, the Bank of Korea reported Wednesday.

Import prices last month decelerated 2.8 percent on month, after increasing 0.4 percent in April. They plunged 12.0 percent on year, the biggest fall since it tumbled 13 percent in May 2020.

Import prices for raw materials plunged 6.3 percent on month, while those for intermediate goods fell 1.6 percent. Import prices for consumer goods rose 0.3 percent and capital goods up 0.1 percent.

The weak won was offset by the drop in global oil prices, which pulled down the prices of coal and petroleum products.

The average price for Dubai Crude in May fell 10.2 percent on month, and was down 30.7 percent from a year earlier.

The won averaged 1,328.21 against the U.S. dollar in May, down 0.6 percent from April. Import prices decelerated despite the weak currency as mineral prices fell due to falling global oil prices, according to the central bank.

Import prices fell 3.2 percent on month in the contract currency.

“Since import prices affect consumer prices over a period of time, it is expected to cause a downward pressure on consumer prices,” said Seo Jung-seok, head of the price statistics team at the Bank of Korea.

Korea’s consumer prices in May slowed to 3.3 percent on year after hitting a 6.3 percent peak in July last year. Core inflation, excluding volatile food and energy prices, remains sticky at 3.9 percent, although it was down 0.1 percentage point from a month earlier.

Bank of Korea Gov. Rhee Chang-yong said monetary policy needs to be operated in “a more sophisticated” manner in an address in central Seoul on Monday, citing the stubbornly high core inflation.

The central bank projects the country’s inflation to rise 3.5 percent this year and 2.4 percent next year.

Meanwhile, export prices in May fell 1.3 percent from a month earlier, down from April's 0.4 percent jump. The figure was down 11.2 percent on year, the steepest drop since a minus 11.3 percent tumble in March 2010.

Prices for agricultural, forestry and marine products rose 1.3 percent on month, while manufacturing products fell 1.3 percent during the same period.

“The export price index continues to drop on an annual basis, but this fall has slowed in electronics and optical instruments when calculated in the contract currency,” Seo added. “In terms of won, it has slightly increased. These factors are expected to positively impact trade.”

BY JIN MIN-JI [jin.minji@joongang.co.kr]