US: Import and Export Prices

Thu Aug 13 07:30:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Import Prices - M/M change -1.0% -2.0% to 0.8% -0.9% -0.1% 0.0%
Export Prices - M/M change -0.3% -1.0% to 0.0% -0.2% -0.2% -0.3%
Import Prices - Y/Y change -10.4% -10.0%
Export Prices - Y/Y change -6.1% -5.7%

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.

Market Consensus Before Announcement
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.

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.