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posted on 11 August 2016

Import and Export Price Year-over-Year Deflation Moderated Again in July 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 down 2.5 % month-over-month, and export agricultural prices down 0.4 %.

  • with import prices up 0.1 % month-over-month, down 3.7 % year-over-year;
  • and export prices up 0.2 % month-over-month, down 3.0 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Import Prices - M/M change 0.2 % to 1.0 % -0.4 % +0.1 %
Export Prices - M/M change none --- % +0.2 %

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: U.S. import prices continued to advance in July, ticking up 0.1 percent. Prices for imports have not recorded a monthly decrease over the past 5 months and increased 3.0 percent since last declining in February. Prior to July, the increases were driven by rising fuel prices. In contrast, in July, nonfuel prices led the advance and fuel prices recorded a decrease. Despite the recent increases, import prices remain down on an over-the-year basis, falling 3.7 percent over the past 12 months. Import prices have not recorded a 12- month advance since 2 years ago when the index rose 0.9 percent between July 2013 and July 2014.

All Exports: Prices for U.S. exports increased 0.2 percent in July, after rising 2.4 percent over the 3 previous months. In July, higher nonagricultural prices more than offset a decrease in agricultural prices. The price index for exports last recorded a 1-month decline when the index edged down 0.1 percent in March. Even accounting for the recent advances, export prices declined 3.0 percent over the past 12 months and have not increased on an over-the-year basis since the index advanced 0.4 percent 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 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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