While month-over-month (MoM) export and import price increases have remained elevated in July 2011. Econintersect looks at YoY price increases as the bulk of its overall economic analysis is on a YoY basis.
Import prices increased 0.3 percent in July, following a 0.6 percent decline in June. Over the past three months, import prices edged down 0.1 percent, after increasing 13.7 percent in the seven months prior to May. Import prices rose 14.0 percent for the year ended in July, the largest 12-month advance since
the index increased 18.1 percent for the year ended in August 2008. Higher prices for both fuel and nonfuel imports contributed to the increase over the past 12 months.
Export prices declined in July, falling 0.4 percent following a 0.1 percent uptick in June. The drop in July was the first decrease since the index fell 0.2 percent in July 2010. The downturn was led by a decline in the price index for agricultural commodities, which was partially offset by an advance in nonagricultural prices. Export prices rose 9.8 percent over the past 12 months, down from the 10.1 percent change for the year ended in June, which was the largest year-over-year increase in export prices since a 10.2 percent advance between July 2007 and July 2008.
The latest data is telling us is that food and oil prices are still 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) = 7.0%
- Exports = 9.8%
- Imports = 14.0%
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.
Consumer Price Index 3.6% In June 2011, Same as April by Steven Hansen
Producer Price Inflation Moderates (temporarily) in June 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