Written by Steven Hansen
Year-over-year export and import price deflation continues. Import prices have deflated year-over year for 19 of the last 20 months.
- with imports up 0.9% month-over-month, down 1.1% year-over-year;
- and exports up 0.6% month-over-month, down 1.3% year-over-year.
- the major reason deflation continues is pretty uniform across the data despite rises in costs from the previous month.
- the markets were expecting exports up 0.2% to 0.5% month-over-month (consensus 0.2%) – and imports up 0.2% to 1.0% (consensus 0.5%).
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 rose for the third consecutive month in February, increasing 0.9 percent. Despite the recent increases, prices for overall imports decreased 1.1 percent for the year ended in February, after declining 0.6 percent from February 2012 to February 2013. The price index for import fuel increased 5.1 percent in February, the largest monthly advance for fuel prices since the index rose 6.1 percent in August 2012. A 4.4 percent increase in petroleum prices and a 22.4 percent jump in natural gas prices both contributed to the overall advance in fuel prices. Natural gas prices have risen 120.5 percent since September 2013. Despite the February increase, import fuel prices fell 0.5 percent over the past year. A 2.6 percent drop in petroleum prices more than offset a 70.6 percent rise in natural gas prices. In contrast to fuel prices, nonfuel import prices declined 0.2 percent in February following a 0.3 percent increase in January. Lower prices for capital goods and foods, feeds, and beverages drove the February decline in nonfuel prices, while prices for nonfuel industrial supplies and materials ticked up 0.1 percent and the price indexes for consumer goods and automotive vehicles were unchanged. Nonfuel import prices also declined over the past 12 months, decreasing 1.2 percent. Lower prices over the past year for nonfuel industrial supplies and materials, automotive vehicles, and capital goods all contributed to the decrease in overall nonfuel prices.
All Exports: Export prices rose 0.6 percent in February, and have not recorded a monthly decline since a 0.6 percent drop in October. The February 2014 increase was the largest monthly advance in export prices since a 0.7 percent rise in February 2013, and higher prices for both agricultural exports and nonagricultural exports contributed to the advance. Despite the recent increases, export prices fell 1.3 percent over the past 12 months.
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 January.
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.