Written by Steven Hansen
In December 2013, year-over-year export and import prices deflated. Import prices have deflated year-over year for 17 of the last 18 months.
- with imports unchanged month-over-month, down 1.3% year-over-year;
- and exports up 0.4% month-over-month, down 1.0% year-over-year.
- one reason for the deflation continues to be lower fuel prices. Food prices tracked the average general movement of the commodities.
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 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 were unchanged in December, after falling 1.6 percent over the previous 2 months. Decreasing fuel prices drove the overall declines in import prices in November and October. The price index for U.S. imports decreased 1.3 percent in 2013 following a 2.0 percent decline in 2012. Falling fuel and nonfuel prices contributed to the 2013 decline in overall import prices.
All Exports: Export prices rose 0.4 percent in December following a 0.1 percent advance in November. Higher agricultural and nonagricultural prices contributed to the December increase in overall export prices. Despite rising in 3 of the past 4 months, the price index for U.S. exports fell 1.0 percent over the past year, after increasing 1.1 percent in 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 December. Here are rates of year-over-year inflation for November 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):
- consumers (CPI) = 1.2% year-over-year
- Finished manufactured goods (PPI) = 0.7% year-over-year
- Exports = up 0.1% month-over-month, down 1.6% year-over-year
- Imports = down 0.6% month-over-month, down 1.5% 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.