Price inflation in exports and imports remain at elevated rates in May 2011.
Import prices ticked up 0.2 percent in May after rising more than 1.0 percent in each of the previous seven months. The May advance was led by higher nonfuel prices. In contrast, fuel prices declined for the month. Prices for overall imports advanced 12.5 percent over the past year, the largest 12-month month increase since the index rose 13.1 percent between September 2007 and September 2008.
Export prices increased 0.2 percent in May, the smallest monthly advance since the index declined 0.2 percent in July 2010. In May, agricultural prices fell for the first time since July 2010, but were more than offset by a continued upward trend in nonagricultural prices. The price index for overall exports rose 9.0 percent for the year ended in May.
It is always interesting to ponder the different rates of inflation occurring in the economy according to a single agency (BLS):
- consumers (CPI) = 3.2%
- manufacturing / production (PPI) = 6.8%
- Exports = 9%
- Imports = 12.5%
Of course each rate of inflation is measuring a different pulse point, and each represents the breadbasket of costs / prices relative to that grouping. It should be pointed out that fuel import prices are up over 42%, and has a 27% weight in the import index. Few consumers spend 27% of their income on fuel.
Econintersect likes to count “things” to understand the economy. Yesterday the trade balance was said to have improved (analysis here). If inflation is removed from the trade balance data – it is clear the USA’s trade balance is improving.
The blue line on the above chart is the inflation adjusted balance of trade. When you adjust for inflation, you are in essence counting quantities – not money. Of course this works only if the index has properly quantified the real rate of price inflation. Since mid-2010, the trade balance has been improving on an inflation adjusted basis.
Two Measures of Inflation: Prices and Expenditures by Doug Short
Inflation: Short- and Long-term View by Doug Short, Steven Hansen and John Lounsbury
CPI: Consumer Prices Up 3.2% by Steven Hansen and Doug Short
Beware: Core CPI Follows Food Inflation by Steven Hansen
Producer Price Index: Price Rise Growth Continues by Steven Hansen