Written by Steven Hansen
In May 2013, year-over-year price deflation continues in import prices for 12 of the last 13 months. Export prices are also deflating for the second month in a row:
- with imports down 0.6% month-over-month, down 1.9% year-over-year
- and exports down 0.5% month-over-month, down 0.9% year-over-year.
The dominate factors in the month-over-month changes were falling oil import prices and falling non-food export prices – however both import and export prices fall was broad based with few exceptions (food export prices grew).
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.
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
According to the press release:
All Imports: U.S. import prices decreased for the third consecutive month in May, falling 0.6 percent, after declines of 0.7 percent in April and 0.1 percent in March. The 1.4 percent drop in import prices over the past three months followed a 1.4 percent increase for the first two months of 2013. Overall import prices fell 1.9 percent for the year ended in May, and have not recorded a 12-month advance since the index rose 0.8 percent between April 2011 and April 2012.
All Exports: Prices for U.S. exports decreased 0.5 percent in May, driven by lower nonagricultural prices which more than offset higher agricultural prices. The May decrease in export prices marked the first time the index has declined for at least three consecutive months since the end of 2008. The price index for exports fell 0.9 percent over the past year, led by falling nonagricultural prices. In contrast, agricultural prices rose over the same period.
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 oil (imports) and agricultural products (exports).
Oil Import Price Change Month-over-Month (blue line) and Agriculture Export Change Month-over-Month
Export / Import prices are the first inflation numbers reported for May. Here are rates of year-over-year inflation for April 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 1.1% year-over-year
- Finished manufactured goods (PPI) = +0.6% year-over-year
- Exports = Down 0.9% year-over-year
- Imports = Down 2.6% year-over-year
Each rate of inflation is measuring a different pulse point, and each represents the breadbasket of costs / prices relative to that grouping.
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.