Import And Export Prices Fall

Cross border price pressures continue to move lower. Import prices fell 0.5 percent in October including a steep 5 tenths downward revision to September to minus 0.6. And it's not just gasoline! Non-petroleum import prices fell 0.4 percent for the 10th decline in a row. Year-on-year, total import prices are down 10.5 percent with non-petroleum down 3.2 percent. The year-on-year rate for the ex-fuel reading, which also excludes natural gas, is minus 3.3 percent for the largest drop since September 2009.

The story on the export side is the much same with export prices down 0.2 percent for a year-on-year decline of minus 6.7 percent. Excluding agricultural products, export prices fell 0.3 for a year-on-year decline of minus 6.1 percent.

Prices have been falling steadily for about a year in this report with declines also appearing for finished goods in what is a very important deflationary trend. Import prices for capital goods are down 2.3 percent year-on-year with vehicles down 1.6 percent and consumer goods down 0.6 percent. The export side is similar including a 2.4 percent year-on-year decline for consumer goods.

By country, contraction is steepest with Canada where import prices fell 1.0 percent in the month for a 20.5 percent year-on-year decline. Latin America is next, also down 1.0 percent in the month for a year-on-year decline of 14.7 percent. Import prices fell 0.1 percent with China where the year-on-year rate is minus 1.4 percent while prices with Europe actually rose 1 tenth in the month for a year-on-year minus 2.9 percent.

Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects generally deflationary global trends. Fed policy makers may be worried that slack has been absorbed in the labor market but they are also concerned about the continued lack of price pressure, the latter speaking against the urgency for a rate hike.

Recent History Of This Indicator:
Import & export prices have been in deep contraction and further contraction is expected. The Econoday consensus is calling for a 0.1 percent decline for import prices and a 0.3 percent decline for export prices. And it isn't all about oil, as non-petroleum import prices have also been in clear contraction. Year-on-year rates in this report have been deeply negative, just over double digits for import prices and just under double digits for export prices. Contraction in import prices reflects the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects deflationary trends in the global price environment.