Export / Import Price Deflation Continues in January 2014

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Year-over-year export and import price deflation continues. Import prices have deflated year-over year for 18 of the last 19 months.

  • with imports up 0.1%month-over-month, down 1.5% year-over-year;
  • and exports up 0.2% month-over-month, down 1.2% year-over-year.
  • the major reason deflation continues is 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 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 ticked up 0.1 percent in January following a 0.2 percent rise the previous month. The January advance was led by higher nonfuel prices, while the increase in December was driven by rising fuel prices. Despite the recent advances, prices for overall imports declined 1.5 percent for the year ended in January. Import prices have not recorded a year-over-year increase since a 0.9 percent rise between July 2012 and July 2013.

All Exports: Export prices advanced for the third consecutive month in January, increasing 0.2 percent, after rising 0.4 percent in December and 0.2 percent in November. January marked the first time since October 2012 that export prices recorded 3 consecutive monthly advances. Despite the recent increase, overall export prices declined 1.2 percent for the year ended in January.

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. Here are rates of year-over-year inflation for December 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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