Written by Steven Hansen
There is absolutely no correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships.
February 2012 export prices rose 0.4% month-over-month while import prices rose 0.4%. The February rise in import prices is due to fuels / lubricants and foods, while the rise in export prices was driven by agriculture exports.
Despite rising crude and food prices, the data is continuing to indicate that the run up in prices seen since mid-2010 is moderating. Exports are now up only 1.5% year-over-year and imports up 5.5%.
The issue is not the rear view look, but the forward view as the rise in energy prices migrates into cost structures. If the current trends continue, import prices should stabilize around 5% annual growth, while export price annual price growth will rise to the 3% to 4% range. According to the press release:
All Imports: The 0.4 percent February increase marked only the second time that import prices have recorded a monthly advance greater than 0.1 percent since the index rose 2.6 percent in April 2011. Prices for overall imports increased 5.5 percent over the past 12 months, the smallest year-over-year rise since the index advanced 5.3 percent between December 2009 and December 2010.
All Exports: The 0.4 percent advance in export prices in February marked the largest monthly increase since a 0.5 percent rise in September. Higher nonagricultural prices more than offset a decline in the price index for agricultural exports. Despite recording the largest monthly increase in five months, overall export prices rose only 1.5 percent over the past 12 months, the smallest year-over-year advance since a 0.4 percent rise for the November 2008-09 period.
The YoY data is now being compared to the steep inflationary cycle which began in mid-2010.
There are different rates of inflation occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 2.9% (January 2012)
- manufacturing / production (PPI) = 4.1% (January 2012)
- Exports = 2.5% (January 2012)
- Imports = 7.1% (January 2012)
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 20.8% year-over-year, and has a 24.3% weight in the import index. Few consumers spend 24.3% of their income on fuel.
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.