Written by Steven Hansen
In August 2013, year-over-year export and import prices deflated. Import prices have deflated year-over year for 13 of the last 14 months.
- with imports unchanged month-over-month, down 0.4% year-over-year;
- and exports down 0.5% month-over-month, down 1.1% year-over-year.
The dominate factors in the month-over-month changes were a significant reduction in agricultural commodities, and a general softness in all prices even though there was a moderate increase in oil prices.
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 have recorded little change the past 2 months, after decreasing 1.8 percent over the prior 4 months. The recent decline contributed to a 0.4 percent drop in import prices for the year ended in August. The decrease from August 2012 to August 2013 was led by lower nonfuel prices, which more than offset higher fuel prices.
All Exports: Prices for U.S. exports continued to trend down in August, decreasing 0.5 percent. The index for overall export prices has not recorded a monthly advance since a 0.7 percent increase in February. Lower prices for both agricultural and nonagricultural exports contributed to the August decline. Overall export prices fell 1.1 percent for the year ended in August, the largest 12-month drop since the index decreased 1.3 percent between July 2011 and July 2012.
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 August. Here are rates of year-over-year inflation for July 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 1.7% year-over-year
- Finished manufactured goods (PPI) = +2.1% year-over-year
- Exports = Up 0.4% year-over-year
- Imports = Up 1.0% 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.