US: Import and Export Prices

Tue Jul 14 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Import Prices - M/M change 0.1% -0.2% to 0.5% -0.1% 1.3% 1.2%
Export Prices - M/M change 0.1% -0.3% to 0.3% -0.2% 0.6% 0.6%
Import Prices - Y/Y change -10.0% -9.6%
Export Prices - Y/Y change -5.7% -5.9%

Cross-border deflationary pressures are not abating as import prices fell 0.1 percent in June with export prices down 0.2 percent. Year-on-year, import prices are down 10.0 percent with export prices down 5.7 percent. These rates are not showing any improvement from prior months with import prices not even getting much of a lift from the bounce back in petroleum prices as the ex-petroleum reading fell 0.2 percent in the month. Year-on-year, ex-petroleum import prices, and this is a core reading, are down 2.6 percent.

Outside of monthly gains for petroleum components, negative signs sweep both the import and export columns with agricultural exports, at minus 1.5 percent in June, extending a deep run of declines. Year-on-year, agricultural export prices are down 16.7 percent in what is not good news for the nation's farming sector. A look at finished goods categories shows no price strength anywhere with import prices for capital goods, at a year-on-year minus 1.7 percent, and export prices for consumer goods, at minus 1.9 percent, especially weak.

By country, import prices fell 0.5 percent with the NICs, down 0.4 percent with Japan, and down 0.1 percent with China. Prices rose 0.4 percent for Canada, up 0.2 percent for the EU, and up 0.1 percent for Latin America.

The strength of the dollar is pulling down import prices but the decline in export prices points to a lack of global price pressures. This report is a reminder that inflation is not yet picking up steam toward the Fed's 2 percent goal and hints at similar results for this week's later releases of producer and consumer prices.

Market Consensus Before Announcement
Import and export prices have been trending deeply in the negative column though headline readings popped higher in May and are expected to show incremental gains in June. Fed policy makers are waiting for price pressures to stabilize and begin moving to their 2 percent year-on-year goal.

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.