Written by Steven Hansen
In June 2013, year-over-year price deflation has ended. Import prices having deflated year-over year for 12 of the last 13 months – grew insignificantly in June. Likewise, export prices grew after deflating for the previous 2 months.
- with imports down 0.2% month-over-month, up 0.2% year-over-year
- and exports down 0.1% month-over-month, up 0.8% year-over-year.
The dominate factors in the month-over-month changes were rising oil import prices and rising non-food export prices – however if the dominate factors are ignored both import and export prices deflated.
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.
Econintersect follows this series to adjust trade data for inflation.
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. Import price deflation is normally associated with strengthening of the dollar relative to other currencies.
According to the press release:
All Imports: Import prices fell 0.2 percent in June following decreases of 0.7 percent in May, 0.6 percent in April, and 0.1 percent in March. Unlike the May and April declines where lower fuel prices contributed to the decreases, the June drop resulted solely from lower nonfuel prices. Despite the decline over the past four months, overall import prices rose 0.2 percent for the year ended in June following a 1.9 percent decrease from May 2012 to May 2013.
All Exports: U.S. export prices edged down 0.1 percent in June following declines of 0.5 percent, 0.7 percent, and 0.5 percent the three previous months. In June, decreasing nonagricultural prices more than offset an increase in the price index for agricultural exports. Overall export prices increased 0.8 percent for the year ended in June, after decreasing 0.9 percent for the year ended in May.
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 (red line)
Export / Import prices are the first inflation numbers reported for June. Here are rates of year-over-year inflation for May 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 1.4% year-over-year
- Finished manufactured goods (PPI) = +1.7% year-over-year
- Exports = Down 0.5% year-over-year
- Imports = Down 1.9% 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.