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posted on 13 October 2016

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

Written by Steven Hansen

Import and export prices continue to deflate year-over-year - although the year-over-year rate of deflation again moderated this month.

Analyst Opinion of the Import / Export Price Situation

Both import and export price deflation is moderating when looking year-over-year. The month-over-month figures given in the headlines only confuse. At the current rate of moderation of deflation (trend line) - both imports and export prices should start inflating by the end of the year.

Import Oil prices were up 1.1 % month-over-month, and export agricultural prices down 1.0 %.

  • with import prices up 0.1 % month-over-month, down 1.1 % year-over-year;
  • and export prices up 0.3 % month-over-month, down 1.5 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Import Prices - M/M change -0.3 % to 0.4 % +0.1 % +0.1 %
Export Prices - M/M change -0.2 % to 0.1 % +0.1 % +0.3 %

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 resumed an upward trend in September, increasing 0.1 percent, after a 0.2- percent decline in August. Prior to August, import prices had risen in each of the previous 5 months, advancing 3.1 percent between February and July. Despite those increases, import prices continue to decline on a 12-month basis, falling 1.1 percent between September 2015 and September 2016. The 1.1 percent decrease was the smallest drop on an over-the-year basis since the index fell 0.3 percent in August 2014.

All Exports: The price index for overall exports increased 0.3 percent in September, as rising nonagricultural prices more than offset declining agricultural prices. The advance followed a 0.8-percent drop the previous month and resumed an upward trend dating back to April. U.S. export prices fell 1.5 percent for the year ended in September, the smallest 12-month decline since the index decreased 0.7 percent in October 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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