Import Price Deflation Ends, Export Prices Inflate More in May 2014

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Year-over-year  import price deflation ended this month with a slight growth of prices year-over-year. Import prices had deflated year-over year for 21 of the previous 23 months. Export prices this month showed marginal year-over-year growth. 

 

Follow up:

  • with imports up 0.1% month-over-month, up 0.4% year-over-year;
  • and exports up 0.1% month-over-month, up 0.5% year-over-year..
  • the markets were expecting export price change from -0.3% to +0.2% month-over-month (consensus +0.2%) – and import price change from  -0.4% to +0.6% (consensus +0.4%).

There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships.

Econintersect follows this series to adjust data for inflation.

Year-over-Year Change – Import Prices (blue line) and Export Prices (red line)

There are three cases of deflation outside of a recession – early 1990′s, late 1990′s, and mid 2000′s. Import price deflation is normally associated with strengthening of the dollar relative to other currencies.

According to the press release:

All Imports: Prices for U.S. imports resumed an upward trend, increasing 0.1 percent in May, after falling 0.5 percent the previous month. Prior to April, import prices rose 1.9 percent over the first quarter of 2014. Import prices advanced 0.4 percent over the past 12 months, driven by higher fuel prices which more than offset a decline in nonfuel prices.

All Exports: The price index for U.S. exports ticked up 0.1 percent in May, after decreasing 1.0 percent in April, and increasing 0.9 percent in March and 0.8 percent in February. In May, rising prices for both agricultural exports and nonagricultural exports contributed to the advance. Export prices rose 0.5 percent over the past year, the largest 12-month increase since the index advanced 0.8 percent between June 2012 and June 2013.

How moderate the price increases have been over the past year is obvious from the graphic below.

Month-over-Month Change – Import Prices (blue line) and Export Prices (red line)

The biggest mover of import and export prices are oil (imports) and agricultural products (exports).

Oil Import Price Change Month-over-Month (blue line) and Agriculture Export Change Month-over-Month (red line)

Export / Import prices are the first inflation numbers reported each month.

Caveats on the Use of the Export / Import Price Index

Both import and export prices index values shown in this post is a weighted average for the the entire category of exports or imports. The BLS has many sub-categories relating to a particular commodity or goods. Econintersect using spot checks believes these subindexes are accurate.

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