|Import Prices - M/M change||-0.3%||-1.1% to 0.5%||-0.3%||0.4%||0.2%|
|Export Prices - M/M change||-0.2%||-0.8% to 0.3%||0.1%||-0.1%||-0.2%|
|Import Prices - Y/Y change||-10.5%||-9.4%|
|Export Prices - Y/Y change||-6.7%||-5.9%|
The doves at the Fed can be a little more persuasive following today's import & export price report where there's scant signs of any inflationary pressures. Import prices fell 0.3 percent in March with the key reading excluding petroleum down 0.4 percent. Year-on-year, import prices are down for an 8th straight month, at an eye-popping minus 10.5 percent overall and down 2.7 percent excluding petroleum. These year-on-year rates are both the steepest declines since late 2009.
The strong dollar is a central factor that is pulling down, not only foreign demand for US exports, but also prices of foreign imports. But this is not a factor on the export side where deflationary forces are also evident. Export prices did edge 0.1 percent higher in the month but are down 6.7 percent year-on-year which is the 7th straight negative reading.
A look at prices of finished goods shows a sweep on minus signs on the import side with motor vehicles showing the most contraction, at minus 0.3 percent for the month and minus 1.8 percent year-on-year. Finished goods on the export side are flat at best with capital goods showing no change on the month and, at only plus 0.7 percent, shows the highest year-on-year rate.
Of the Fed's two policy targets, employment is strong, or at least it had been until last week's very soft employment report for March. The other target is inflation, and it's definitely soft. The timing of the Fed's first rate hike has not been pulled forward by today's report. Watch next week for the producer and consumer price reports.
Market Consensus Before Announcement
Import prices did rise 0.4 percent in February but excluding petroleum imports, prices of which rebounded a sharp 8.1 percent, import prices fell a steep 0.4 percent following a 0.6 percent decline in January. Year-on-year, import prices excluding petroleum are in the negative column at minus 1.8 percent as are total prices which are down a very steep and very deflationary minus 9.4 percent.
Export prices are also down, at minus 0.1 percent for a year-on-year decline of minus 5.9 percent. Agricultural prices are the major component on the export side, down 2.0 percent and excluding which prices edged 0.2 percent higher. Year-on-year, non-agricultural export prices are at minus 5.5 percent.
Import price indexes are compiled for the prices of goods that are bought in the United States but produced abroad and export price indexes are developed for the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products.
Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar. The bond market is especially sensitive to the risk of importing inflation because it erodes the value of the principal (the original investment) which is paid back when the bond matures. It also decreases the value of the steady stream of interest rate payments on this type of security. Inflation leads to higher interest rates and that's bad news for stocks, as well. By monitoring inflation gauges such as import prices, investors can keep an eye on this menace to their portfolios.