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posted on 11 June 2015

Import and Export Price Year-over-Year Deflation Continues in May 2015. However Deflation Was Less Than Last Month.

Written by Steven Hansen

Trade prices continue to deflate year-over-year - but the rate of deflation slowed.

Import Oil prices were up 11.8% month-over-month, but export agricultural prices fell 0.9%.

  • with import prices up 1.3% month-over-month, down 9.6% year-over-year;
  • and export prices up 0.6% month-over-month, down 5.9% year-over-year..
  • the markets were expecting:
Consensus Range Consensus Actual
Export Prices - M/M change -0.2 % to 0.2 % +0.1 % +0.6 %
Import Prices - M/M change 0.0 % to 2.3 % +0.9 % +1.3 %

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: U.S. import prices advanced 1.3 percent in May, after decreasing 0.2 percent in April and March, and 0.4 percent in February. The May increase was the first monthly rise since the index advanced 0.3 percent in June 2014 and the largest 1-month increase since the index rose 1.4 percent in March 2012. Despite the May increase, prices for imports decreased 9.6 percent over the past year, and have not recorded a 12-month rise since the index advanced 0.9 percent between July 2013 and July 2014.

All Exports: Prices for U.S. exports increased 0.6 percent in May following a 0.7-percent drop the previous month. The May advance was the largest rise for the index since a 0.9-percent increase in March 2014. In May, rising nonagricultural prices more than offset lower agricultural prices. Despite the May upturn, the price index for overall exports declined 5.9 percent over the past 12 months.

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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