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posted on 14 July 2015

Import and Export Price Year-over-Year Deflation Continues in June 2015, and Deflation Worse than Expectations.

Written by Steven Hansen

Trade prices continue to deflate year-over-year - and deflation was worse than market expectations.

Import Oil prices were up 0.7% month-over-month, but export agricultural prices fell 1.5%.

  • with import prices down 0.1% month-over-month, down 10.0% year-over-year;
  • and export prices down 0.2% month-over-month, down 5.7% year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Export Prices - M/M change -0.3 % to 0.3 % +0.1 % -0.2 %
Import Prices - M/M change -0.2 % to 0.5 % +0.1 % -0.1 %

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: Overall import prices declined 0.1 percent in June, resuming a downward trend over the past year, after the index rose 1.2 percent in May. Prices for U.S imports also decreased over the past 12 months, falling 10.0 percent from June 2014 to June 2015. Overall import prices have not recorded a year-over-year advance since the index rose 0.9 percent for the year ended in July 2014.

All Exports: The price index for U.S. exports declined 0.2 percent in June, after rising 0.6 percent the previous month, which was the largest advance since the index rose 0.9 percent in March 2014. Falling agricultural prices drove the June decline, although nonagricultural prices also decreased. Export prices declined 5.7 percent over the past year, and have not recorded a 12-month advance since the index rose 0.4 percent for the year ended in August 2014.

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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