Import and Export Price Deflation Accelerates in January 2015. Biggest Monthly Drop Since the Great Recession.

Written by Steven Hansen

Global trade prices are deflating. Imports down 8% from a year ago. Exports down 5.4% from a year ago. Of course the elephant in the room is falling oil prices, but agricultural prices are deflating also

• with import prices down 8.0% month-over-month, down 8.0% year-over-year;
• and export prices down 5.4% month-over-month, down 5.4% year-over-year..
• the markets were expecting:

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: The price index for U.S. imports declined 2.8 percent in January. The index has not recorded a monthly advance since June 2014, and the January drop was the largest 1-month decrease since the index fell 4.6 percent in December 2008. U.S. import prices decreased 8.0 percent between January 2014 and January 2015, the largest 12-month decline since the index fell 12.0 percent in September 2009.

All Exports: U.S. export prices declined 2.0 percent in January after declines of 1.0-percent in December and 0.9-percent in both November and October. The January drop matched a 2.0-percent decline in October 2011, the largest monthly decrease since the index fell 2.2 percent in December 2008. Both agricultural and nonagricultural prices contributed to the overall drop in January. The price index for overall exports fell 5.4 percent over the past 12 months, the largest year-over-year decline since the index decreased 5.6 percent in September 2009.

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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