July 2020 Import Year-over-Year Inflation Now -3.3%

Written by Steven Hansen

Year-over-year import price indices inflation remained in contraction and moved from -3.9 % to -3.3 %.

Import Oil prices moved from +21.9 % to +6.9 % month-over-month, and export agricultural prices up 1.5 %.

• the markets were expecting (from Econoday):

There is only a 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 the strengthening of the dollar relative to other currencies.

According to the press release:

Imports: U.S. import prices rose for the third consecutive month in July, increasing 0.7 percent for the month and 2.8 percent from April to July, the largest 3-month advance since May 2011. The July advance was led by rising fuel prices; nonfuel prices also contributed to the increase. Despite the advance over the past 3 months, the price index for U.S. imports declined 3.3 percent over the past year. Import fuel prices advanced 6.9 percent in July, after increasing 21.9 percent and 13.7 percent the 2 previous months. The 48.2-percent rise from April to July was the largest 3-month advance since the index increased 58.6 percent in the third quarter of 1990. Despite the recent increases, import fuel prices fell 32.8 percent over the past 12 months. In July, a 7.8-percent advance in petroleum prices more than offset a 9.1-percent decline in natural gas prices. The July rise in petroleum prices followed increases of 23.1 percent in June and 14.3 percent in May; import petroleum prices fell 34.6 percent over the past year. In contrast, natural gas prices advanced 45.1 percent for the year ended in July.

Exports: U.S. export prices advanced 0.8 percent in July following a 1.2-percent increase the previous month. Higher prices for nonagricultural exports and agricultural exports both contributed to the July rise. Despite the upturn in the past 2 months, the price index for U.S. exports decreased 4.4 percent for the year ended in July. (See table 2.) Agricultural Exports: Agricultural export prices advanced 1.5 percent for the second consecutive month in July, the first monthly increases since January. In July, rising prices for soybeans, dairy products, corn, vegetables, cotton, and fruit more than offset falling prices for meat, nuts, and wheat. Prices for agricultural exports declined 3.3 percent over the past 12 months, led by a 15.4-perent decrease in corn prices, a 21.6- percent drop in nut prices, and a 5.7-percent fall in meat prices.

Month-over-Month Change – Import Prices (blue line) and Export Prices (red line)

The biggest mover of import and export prices is usually oil (imports) and agricultural products (exports).

Oil Import Price Change Month-over-Month (blue line) and Agriculture Export Change Month-over-Month (red line)

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 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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