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posted on 12 February 2016

Import and Export Price Year-over-Year Deflation Continues in January 2016.

Written by Steven Hansen

Trade prices continue to deflate year-over-year, and energy prices again drove this month's decline.

Import Oil prices were down 12.4 % month-over-month, and export agricultural prices decreased 1.1 %.

  • with import prices down 1.1 % month-over-month, down 6.2 % year-over-year;
  • and export prices down 0.8 % month-over-month, down 5.7 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Export Prices - M/M change -2.2 % to -0.7 % -1.4 % -1.1 %
Import Prices - M/M change -1.0 % to -0.2 % -0.6 % -0.8 %

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 overall imports fell 1.1 percent in January, the largest monthly decrease for the index since a 1.8-percent drop in August 2015. Both fuel and nonfuel prices continued to trend down. Import prices fell 6.2 percent over the past year. Despite declining in January, the 12-month drop in import prices was the smallest over-the-year decrease since the index fell 5.6 percent between December 2013 and December 2014.

All Exports: Prices for U.S. exports fell 0.8 percent in January and have not recorded a monthly advance since the index rose 0.5 percent in May 2015. In January, declining prices for both agricultural exports and nonagricultural exports contributed to the overall drop. The price index for overall exports fell 5.7 percent for the year ended in January.

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 usually 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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