While month-over-month (MoM) export and import price increases have moderated in June 2011, the year-over-year (YoY) price increases continue to grow. Econintersect looks at YoY price increases as the bulk of its overall economic analysis is on a YoY basis.
Import prices decreased 0.5 percent in June following a 0.1 percent uptick the previous month. The June drop was the first monthly decline since the index fell 1.2 percent in June 2010. Prior to May, import prices rose at least one percent in each of the previous seven months. Import prices increased 13.6 percent for the year ended in June, the largest year-over-year advance since the index rose 18.1 percent between August 2007 and August 2008.
Export prices continued to rise in June, ticking up 0.1 percent after a 0.2 percent increase the previous month. The recent increases were the smallest since the index declined 0.2 percent in July 2010. The June advance was led by higher agricultural prices as nonagricultural prices remained unchanged for the month. The price index for overall exports advanced 9.9 percent for the June 2010-11 period, the largest 12-month increase in export prices since the index rose 10.2 percent between July 2007 and July 2008.
The latest data is telling us is that food and oil prices are taking a breather from their recent price run-up. The YoY data is being compared against the tail end of a deflationary cycle which is creating a temporary high point in inflation, all other factors being equal. The following graph illustrates this point:
There are different rates of inflation occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 3.6%
- manufacturing / production (PPI) = 7.3%
- Exports = 9.9%
- Imports = 13.6%
Each rate of inflation is measuring a different pulse point, and each represents the breadbasket of costs / prices relative to that grouping. It should be pointed out that fuel import prices are up over 42%, and has a 27% weight in the import index. Few consumers spend 27% of their income on fuel.
CPI: Consumer Price Increases Rise to 3.6% in May 2011 by Doug Short & Steven Hansen
PPI: Prices Continue to Inflate Year-over-Year in May 2011 by Steven Hansen
Two Measures of Inflation: Prices and Expenditures by Doug Short
Inflation: Short- and Long-term View by Doug Short, Steven Hansen and John Lounsbury
Beware: Core CPI Follows Food Inflation by Steven Hansen