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posted on 14 June 2016

Import and Export Price Year-over-Year Deflation Moderated in May 2016.

Written by Steven Hansen

Trade prices continue to deflate year-over-year - although the rate of deflation again declined this month.

Import Oil prices were up 16.2 % month-over-month, and export agricultural prices increased 2.9 %.

  • with import prices up 1.4 % month-over-month, down 5.0 % year-over-year;
  • and export prices up 1.1 % month-over-month, down 4.5 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Import Prices - M/M change 0.2 % to 1.4 % +0.8 % +1.4 %
Export Prices - M/M change 0.1 % to 0.4 % +0.2 % +1.1 %

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: Import prices rose for the third consecutive month in May, rising 1.4 percent, after recording 0.7-percent and 0.4-percent increases in April and March. The May advance was the largest monthly rise since the index increased 1.4 percent in March 2012. The last 1-month gain larger than 1.4 percent was a 2.6-percent advance in April 2011. Despite the recent increases, import prices declined 5.0 percent over the past 12 months, driven by decreases over the second half of 2015 and the first 2 months of 2016.

All Exports: U.S. export prices rose 1.1 percent in May, following a 0.5-percent advance the previous month. Higher agricultural prices and nonagricultural prices both contributed to the May and April increases. The May advance in export prices was the largest monthly rise since the index increased 1.5 percent in March 2011. Overall export prices continued to decrease on a 12-month basis, although the 4.5- percent drop between May 2015 and May 2016 was the smallest over-the-year decrease since the index fell 3.0 percent for the year ended in December 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 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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