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posted on 10 September 2015

Import and Export Price Year-over-Year Deflation Continues in August 2015. Deflation Is Growing!

Written by Steven Hansen

Trade prices continue to deflate year-over-year - and the the rate of deflation is increasing.

Import Oil prices were down 13.3% month-over-month, but export agricultural prices decreased 2.6%.

  • with import prices down 1.8% month-over-month, down 11.4% year-over-year;
  • and export prices down 1.4% month-over-month, down 7.0% year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Export Prices - M/M change -1.0 % to 0.1 % -0.4 % -1.4 %
Import Prices - M/M change -3.0 % to -0.4 % -1.6 % -1.8 %

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: The price index for U.S. imports decreased 1.8 percent in August, the largest monthly decline since the index fell 3.2 percent in January. A sharp drop in fuel prices and lower nonfuel prices both contributed to the decrease in August. With the exception of May and June, import prices trended down over the past year, falling 11.4 percent between August 2014 and August 2015. The 12-month drop in August was the largest year-over-year decline since the index fell 12.0 percent in September 2009.

All Exports: U.S. export prices decreased 1.4 percent in August following a 0.4-percent decline in July. Lower prices for both nonagricultural and agricultural exports contributed to the drop in August, which was the largest 1-month drop since a 1.7-percent decline in January. Prices for U.S. exports also decreased over the past 12 months, falling 7.0 percent, the largest year-over-year decline since the index fell 8.3 percent in July 2009.

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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