Import Price Deflation Continues, Export Prices Inflate in March 2014

Written by Steven Hansen

Year-over-year  import price deflation continues. Import prices have deflated year-over year for 20 of the last 21 months. Export prices this month showed marginal year-over-year growth. However, removing fuels and foods – both imports and export prices strongly deflated year-over-year.

• with imports up 0.6% month-over-month, down 0.6% year-over-year;
• and exports up 0.8% month-over-month, up 0.2% year-over-year.
• leaving off food and fuels – there is significant deflation in both exports and imports. Saying it another way – core exports and imports are strongly deflating.
• the markets were expecting export price change from -0.3% to +0.6% month-over-month (consensus +0.3%) – and import price change from  -0.2% to +0.9% (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 0.6 percent in March and increased 1.9 percent over the first quarter of 2014. The advance from December 2013 to March 2014 was the largest 3-month rise since the index increased 2.5 percent between July and October 2012. Despite the recent advances, import prices fell 0.6 percent over the past year. Import prices have not recorded a 12-month rise since the index increased 0.9 percent for the year ended July 2013.

All Exports: Export prices advanced 0.8 percent in March, the largest monthly increase for the index since a 0.8-percent rise in September 2012. Rising prices for both agricultural exports and nonagricultural exports each contributed to the advance in export prices. Prices for exports also rose over the past year, increasing 0.2 percent. The year-over-year advance was the first 12-month rise since a 0.3-percent increase between July 2012 and July 2013.

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.

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