Export / Import Prices Deflation Grows Larger in October 2013

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In October 2013, year-over-year export and import prices deflated. Import prices have deflated year-over year for 15 of the last 16 months. This was a very significant decline this month.

  • with imports down 0.7% month-over-month, down 2.0% year-over-year;
  • and exports down 0.5% month-over-month, down 2.1% year-over-year.

The dominate factors in the month-over-month changes was a general deflation lead by lower fuel prices and lower food prices.

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 trade 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: Prices for overall imports declined 0.7 percent in October, after ticking up between 0.1 percent and 0.2 percent in each of the previous 3 months. The October drop was driven by lower fuel prices as nonfuel import prices were unchanged. Import prices decreased 2.0 percent for the year ended in October, the largest 12-month drop since a 2.7 percent decline between April 2012 and April 2013.

All Exports: The price index for overall exports decreased 0.5 percent in October, resuming a downward trend following a 0.4 percent increase the previous month. Prior to September, export prices last advanced in February when the index rose 0.7 percent. Export prices also fell over the past 12 months, declining 2.1 percent, the largest year-over-year decrease since a 2.1 percent drop for the year ended in June 2012. The last time the index fell more than 2.1 percent was a 3.6 percent decline between October 2008 and October 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 for October. Here are rates of year-over-year inflation for September 2013 (previous reporting month) occurring in the economy according to multiple measurements by a single agency (BLS):

Each rate of inflation is measuring a different pulse point, and each represents the breadbasket of costs / prices relative to that grouping.

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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