Import Price Deflation Continues, Export Prices Hardly Inflate in April 2014

Written by Steven Hansen

Year-over-year  import price deflation continues. Import prices have deflated year-over year for 21 of the last 22 months. Export prices this month showed marginal year-over-year growth. However, removing fuels and foods – even export prices deflated year-over-year.

• with imports down 0.64% month-over-month, down 0.3% year-over-year;
• and exports down 1.0% month-over-month, up 0.1% year-over-year.
• leaving off food and fuels – there is some to significant deflation in both exports and imports. Saying it another way – core exports and imports are deflating.
• the markets were expecting export price change from -0.3% to +0.2% month-over-month (consensus +0.2%) – and import price change from  -0.4% to +0.6% (consensus +0.4%).

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 declined 0.4 percent in April, after increasing 1.8 percent in the first quarter of 2014. The April drop was the first monthly decrease since the index fell 0.9 percent in November 2013. Import prices also fell 0.3 percent over the past 12 months and have not recorded a year-over-year advance since the index increased 0.9 percent from July 2012 to July 2013.

All Exports: : Export prices fell 1.0 percent in April, after rising in each of the previous 5 months. The April decrease was the largest monthly decline since the index fell 1.7 percent in June 2012, and was led by lower nonagricultural prices which more than offset rising agricultural prices. The price index for overall exports increased 0.1 percent for the year ended in April following a 0.4-percent year-over-year rise the previous month.

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 each month.

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.

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