Import And Export Prices Fall

Cross-border price pressures continue to contract but at a slowing rate in what offers limited good news for the inflation outlook. Import prices fell 0.3 percent in February with export prices down 0.4 percent, both better than expected and showing the least contraction since October. And import prices excluding food & fuels inched 0.1 percent higher for the first positive reading since May last year.

Petroleum products pulled import prices lower in February but less so than prior months. Petroleum prices fell 4.0 percent in the month with year-on-year contraction still very severe at 39 percent, though ongoing gains for oil do point to improvement for the March report. Prices of finished imports continue to contract but only marginally and the same is true for the export side.

Turning to country of origin, import prices fell 1.4 percent with Latin America where the year-on-year rate, reflecting low commodity prices, is down 10.1 percent. Import prices with Canada, also reflecting commodity prices, fell 0.8 percent with the year-on-year rate at minus 11.9 percent. Import prices with other trading partners show only single digit negative rates including China at minus 1.6 percent.

Year-on-year rates in this report are still deeply negative but are the least negative since this time last year. Overall import prices are at minus 6.1 percent year-on-year with export prices down nearly identically, at minus 6.0 percent. And ongoing gains for oil prices point to further improvement for the March report. Today's report fits in with other inflation readings, especially the PCE and CPI core rates, where pressures are beginning to move in the right direction for policy, that is up.

Recent History Of This Indicator:
No price report has been as weak for as long as import & export prices where year-on-year rates are in the negative mid-single digits. The import side has been pressured by low prices for imports made cheaper by the strength of the dollar, while the export side has been hurt by falling global demand for U.S. products including the key category of capital goods. Econoday forecasters see import prices falling 0.8 percent in February with export prices down 0.5 percent. None of the forecasters see a gain for either of the readings.