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posted on 13 December 2016

Import and Export Price Year-over-Year Deflation Moderated Again in November 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 - with import prices now barely deflating.

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. What was interesting this month is that import fuel prices increased whilst total imports deflated - and export prices deflated month-over-month whilst agriculture imports deflated.

Import Oil prices were up 7.2 % month-over-month, and export agricultural prices up 0.4 %.

  • with import prices down 0.3 % month-over-month, down 0.1 % year-over-year;
  • and export prices down 0.1 % month-over-month, down 0.3 % year-over-year..
  • the markets were expecting (from Bloomberg):
Consensus Range Consensus Actual
Import Prices - M/M change -0.7 % to 0.3 % -0.4 % -0.3 %
Export Prices - M/M change -0.2 % to 0.3 % +0.0 % -0.1 %

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: The price index for U.S. imports declined 0.3 percent in November, the largest monthly decrease since the index fell 0.5 percent in February. Prior to November, import prices had trended up since February, with the only decline coming in August when the index fell 0.2 percent. Despite rising throughout much of 2016, import prices remained down on a 12-month basis, declining 0.1 percent between November 2015 and November 2016. The last over-the-year advance in import prices was a 0.9-percent increase in July 2014.

All Exports: The price index for overall exports edged down 0.1 percent in November, after increasing 0.2 percent in October and 0.3 percent in September. In November, declining nonagricultural prices led the overall decrease. U.S. export prices also fell over the past 12 months, decreasing 0.3 percent. Export prices have not risen on a 12-month basis since the index rose 0.4 percent between August 2013 and 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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