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.
The story remains the continually moderating year-over-year inflation – however, this moderating cycle will shortly end. Exports are now up only 0.9% year-over-year and imports up 3.4% (1.4% if oil is excluded).
February 2012 export prices rose 0.8% month-over-month while import prices rose 1.3%. The February rise in import prices is due to fuels / lubricants and other industrial products, while the rise in export prices was driven by agriculture and manufactured product exports.
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: Import prices advanced 1.3 percent in March, the first increase for the index since rising 0.7 percent in November and the largest monthly rise since a 2.6 percent advance in April 2011. Import prices increased 3.4 percent over the past year, the smallest 12-month advance for the index since a similar 3.4 percent rise between November 2008 and November 2009.
All Exports: U.S. export prices increased 0.8 percent in March, the largest monthly advance for the index since a 0.8 percent rise in April 2011. In March, higher prices for nonagricultural goods and agricultural goods each contributed to the advance. Despite recording the largest monthly increase in 11 months, overall export prices rose only 0.9 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 end of the steep inflationary cycle which began in mid-2010. March likely is the end of the decreasing year-over-year cycle for imports.
There are different rates of inflation occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 2.9% (February 2012)
- manufacturing / production (PPI) = 3.3% (February 2012)
- Exports = 1.5% (February 2012)
- Imports = 5.5% (February 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 9.6% year-over-year, and has a 23.4% weight in the import index. Few consumers spend 23.4% 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.