Import And Export Prices Continue To Slump

Down an as-expected 0.5 percent in August, import prices continue to slump to three-year lows in a trend that reflects slowing global demand as well as the strength of the dollar and which will make it harder for the Federal Reserve to reach their 2 percent inflation goal. Year-on-year, import prices were down 2.0 percent in August for the fifth straight month of contraction.

At least the weakness is centered in petroleum where prices fell sharply in August and excluding which import prices were unchanged on the month but still in negative ground year-on-year, at minus 1.0 percent. Prices of imported fuels & lubricants fell 4.3 percent in the month for 8.7 percent annual contraction. Prices of imported finished goods continue to show very little change with capital goods bringing up the rear on a yearly basis at minus 1.1 percent.

Export prices fell a sharper-than-expected 0.6 percent in August, pulled down by a 2.5 percent monthly drop for agricultural commodities. Yet non-agricultural commodities were also weaker, down 0.4 percent in the month and reflecting oil-related price declines for nondurable industrial supplies & materials that fell 2.1 percent in the month. Fuels & lubricants were down 3.5 percent in the month. Finished goods, like the import side, continue to show very little change though prices of exported vehicles did slip 0.2 percent in the month. Year-on-year export prices were down 1.4 percent for the fourth straight monthly decline to also extend their weakest run in three years.

Country data continue to show very little price variation for Chinese imports, down 0.1 percent on the month and down 1.6 percent on the year. This suggests that Chinese exporters are only marginally discounting goods shipped to the US. Note that prices in this report, unlike the consumer and producer price reports, exclude tariff effects.

Today's report rounds out August's inflation data which, despite four months of pressure for consumer core prices (data released Thursday), still point to subdued global price conditions and which will support arguments from the FOMC doves for another incremental rate cut at next week's FOMC.