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posted on 13 July 2016

Import and Export Price Year-over-Year Deflation Moderated Again in June 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 6.2 % month-over-month, and export agricultural prices increased 2.4 %.

  • with import prices up 0.2 % month-over-month, down 4.8 % year-over-year;
  • and export prices up 0.8 % month-over-month, down 3.5 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Import Prices - M/M change 0.2 % to 1.0 % +0.5 % +0.2 %
Export Prices - M/M change -0.2 % to 1.0 % +0.3 % +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: Prices for U.S. imports continued to trend up in June, rising 0.2 percent, after increasing 2.6 percent between February and May. That was the largest 3-month rise since import prices increased 5.8 percent between February and May 2011. Most of the recent increase in import prices was led by higher fuel prices. Despite the recent advances, import prices remain down on a 12-month basis, falling 4.8 percent for the year ended in June. That was the smallest over-the-year decline since the index fell 3.1 percent for the 12 months ended in November 2014.

All Exports: Export prices advanced 0.8 percent in June following a 1.2-percent increase the previous month. The 2.4-percent rise in the second quarter of 2016 was the largest 3-month advance in export prices since the index rose 2.7 percent between February and May 2011. In June, higher agricultural and nonagricultural prices both contributed to the overall increase in export prices. The price index for U.S. exports decreased 3.5 percent over the past 12 months, the smallest over-the-year decline since the index fell 3.0 percent 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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