Written by Steven Hansen
In November 2013, year-over-year export and import prices deflated. Import prices have deflated year-over year for 16 of the last 17 months.
- with imports down 0.6% month-over-month, down 1.5% year-over-year;
- and exports up 0.1% month-over-month, down 1.6% year-over-year.
- the reason for the deflation continues to be lower fuel prices and lower food prices – but even ignoring these leaders, deflation would continue in exports and imports.
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 0.6 percent in November following a 0.6 percent decrease in October. Those were the first monthly declines for the index since a 0.4 percent drop in June. The price index for U.S. imports decreased 1.5 percent over the past 12 months, the third consecutive month of declining year-over-year changes.
All Exports: Prices for overall exports advanced 0.1 percent in November after falling 0.6 percent in October. The increase was driven by higher nonagricultural prices which more than offset a decline in agricultural prices. Despite the November increase, the price index for overall exports fell 1.6 percent over the past year.
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 October. Here are rates of year-over-year inflation for October 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 1.0% year-over-year
- Finished manufactured goods (PPI) = 0.3% year-over-year
- Exports = down 0.5% month-over-month, down 2.1% year-over-year
- Imports = down 0.7% month-over-month, down 2.0% 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.