I. Background

Every month, NSO comes out with press releases on foreign trade, both on merchandise imports and exports with their F.O.B. values. However, the changes observed in the F.O.B. values do not complete the whole story on the performance of merchandise trade. Because the F.O.B. value is a function of price and volume or quantity imported or exported, such changes can best be explained in relation to the changes in price and volume or quantity. For instance, while the value of merchandise imports and exports may have slowed down, their prices may have also slowed down, and the volume or quantity of merchandise trade, which is what is measured in Gross Domestic Product, may not have decreased.

The value of merchandise exports increased in July 2000 by 12.9 percent to $3,219 million a year ago, from a comparable 19.4 percent year-on-year growth in June. That of merchandise imports declined by 4.1 percent to $2,676 million in July 2000, although this was slower than the 6.6 percent drop in June. These changes in the value of export and import shipments are translated equivalently to the growth in the value index as shown in the following table.

Table 1. Changes in Value Index of Exports and Imports:
June and July 1999 and 2000

This report presents the series of (1) movements in the volumes or quantities of merchandise which were exported and imported and (2) price movements in exports and imports which were used to deflate the reported values.

A. EXPORTS

Table 2. Changes in Quantity Index of Exports: June and July 1999 & 2000

1. Year-on-Year (July 2000 over July 1999)

The volume of total merchandise exports increased by 15.5 percent in July 2000 compared to the 28.3 percent gain in June. All commodity groups increased except for beverages and tobacco and chemicals.

Electronic components, which was earlier reported as the top earner for July 2000, increased by 9.3 percent in volume compared to the 45.5 percent jump in June 2000.

2. Month-on-Month (July 2000 over June 2000)

The volume of total merchandise exports posted zero growth in July 2000 from an increase of 8.0 percent in June 2000. This was due to the reduction of exports of manufactured goods and other commodities and transactions. That of microcircuits and semi-conductors under electronic components also fell by 8.3 percent.

B. IMPORTS

Table 3. Changes in Quantity Index of Imports: June and July 1999 & 2000

1. Year-on-Year (July 2000 over July 1999)

The volume of total merchandise imports also declined in July 2000 although by a slower rate of 3.8 percent compared to 6.3 percent in June. This was due to the bigger decline of 29.2 percent (vs. 20.2 percent earlier) in the volume of imports of other commodities and transactions as well as the bigger increase of 9.5 percent (vs. 6.0 percent earlier) in machinery and transport equipment.

Also contributing to the overall volume reduction of merchandise imports was the 24.1 percent decline in the volume of imported electronic components in July 2000 from a bigger 31.9 percent drop last month.

2. Month-on-Month (July 2000 over June 2000)

The volume of total merchandise imports increased by 9.9 percent in July 2000 from a decrease of 2.6 percent in June 2000. This was due to the gains of 10.2 percent in machinery and transport equipment and 8.6 percent in miscellaneous manufactured articles.

Electronic components, the top imports for July 2000, recorded an 8.6 percent increase in its volume.

III. PRICES

A. EXPORTS

Table 4. Changes in Price Index of Exports: June and July 1999 and 2000

1. Year-on-Year (July 2000 over July 1999)

The price index for total merchandise exports declined by 1.6 percent on July 2000 over prices of July 1999. This was slower than the 6.5 percent decrease observed in June 2000.

This was due to the smaller 3.1 percent decline on the prices of Electronic Components in July compared to the 13.5 percent drop in June. Electronic Components had a weight of 51 percent in the July 2000 export price index.

2. Month-on-Month (July 2000 over June 2000)

The price index for total merchandise exports fell by 5.4 percent in July 2000 from an increase of 6.6 percent in June 2000. This was due to the price reduction of semiconductors under electronics components which as a group decreased by 8.8 percent in July 2000.

B. IMPORTS

Table 5. Changes in Price Index of Imports: June and July 1999 and 2000

1. Year-on-Year (July 2000 over July 1999)

The price index for total merchandise imports still recorded a zero growth in July 2000. This was due to the 11.5 percent decline in the prices of machinery and transport equipment and the 5.3 percent decrease in chemicals which dampened the 50 percent increase in mineral fuels and lubricants; 9.7 percent in manufactured goods; and 1.9 percent in other commodities and transactions.

2. Month-on-Month (July 2000 over June 2000)

The price index for total merchandise exports fell by 3.0 percent in July 2000 from an increase of 4.2 percent in June 2000. This was due to the price reduction of 9.1 percent in machinery and transport equipment.

IV. Technical Notes

A. OBJECTIVES AND USES OF MERCHANDISE TRADE INDEXES

Merchandise Trade Indexes, namely: value index, quantity index and price index for merchandise imports and exports, are generated by the National Statistics Office. These indexes provide a general measure of the changes in value, volume and prices of imported/exported commodity or group of commodities in a given period of time. Thus, these mainly measure the composite change in the value, prices, and quantity of various merchandise trades over time.

The main objective of using indexes is to break down changes in the values of exports or imports into price changes and volume changes. Thus, indexes would help us analyze whether a change in value of exports or imports of a commodity or group of commodities can be explained by changes in prices, volumes or both. Furthermore, indexes can be used to (1) measure price behavior in international markets, and (2) serve as basis for calculating volume of merchandise trade which is what is measured in Gross Domestic Product.

B. SOURCE DATA AND CALCULATIONS FOR MERCHANDISE TRADE INDEXES

The index calculations are based on the customs declarations, i.e., import and export manifests, collected by the National Statistics Office from the Bureau of Customs. For purposes of calculating indexes, the information on the F.O.B. value (in US Dollars) and the quantity exported and imported are used. Furthermore, the base year used is 1995 so that the base data used are the values and quantities of imports and exports of specific commodities in 1995. The value index of a commodity is computed as the quotient of current and base year value while the price index of the same is calculated as the ratio of current price over the base price. In addition, the relative importance of commodities (i.e., weights) in the total import/export is taken into account in the computation of price index. Finally, the quantity index is derived as the ratio between the computed value index over the computed price index.

The over-all merchandise trade indexes is tabulated using ten major commodity groups. The ten groups are; Foods and Live Animals; Beverages and Tobacco; Crude Materials; Mineral Fuels, lubricants and related materials; Animal and Vegetable Oils, Fats and Waxes; Chemicals and related Products; Manufactured Goods; Machinery and Transport Equipment; Miscellaneous Manufactured Articles; and Other Commodities. The most detailed commodity specification contains approximately 8,314 sub-items and they are defined as aggregate of the commodity classification by which the indexes are based on.

Detailed discussion on the methodology can be found in special releases on Foreign Trade posted on the NSO website, http://www.census.gov.ph.