Import Prices Take Steep Fall, Export Prices Down Slightly

Cross-border deflationary pressures were, unfortunately, very evident in July with import prices falling a very steep 0.9 percent and with export prices down 0.2 percent. Petroleum prices, down 5.9 percent in the month, pulled down import prices the most in July though prices excluding petroleum were still weak, down 0.3 percent following June's 0.2 percent drop. Year-on-year, this reading is down 2.8 percent vs minus 10.4 percent for total import prices.

Export prices fell 0.2 percent in July following June's 0.3 percent decline. Prices for industrial supplies, reflecting the decline in petroleum, were especially weak in the month and more than offset a 0.8 percent bounce higher for agricultural goods. Year-on-year, export prices are down 6.1 percent.

A look at finished goods, whether on the import or export side, shows a run of minus signs for both the monthly readings and the year-on-year readings. This report highlights the risk of deflation which, given this month's ongoing decline in the price of oil, remains a stubborn obstacle for Federal Reserve policy.

Recent History Of This Indicator:
Deflationary cross-border price pressures are expected to pull down import and export prices in July. Import prices, in part reflecting the strength of the dollar, are expected to contract for the 11th time in 12 months, down a full 1.0 percent in July. Export prices, reflecting low commodity prices, are expected to fall 0.3 percent which would be the 9th decline in 11 months. This report looks to be a reminder that inflation is not yet picking up steam toward the Fed's 2 percent goal.