|Import Prices - M/M change||-0.1%||-0.4% to 0.2%||-0.5%||-0.1%||-0.6%|
|Export Prices - M/M change||-0.3%||-0.5% to 0.1%||-0.2%||-0.7%||-0.6%|
|Import Prices - Y/Y change||-10.5%||-10.7%|
|Export Prices - Y/Y change||-6.7%||-7.4%|
Cross border price pressures continue to move lower. Import prices fell 0.5 percent in October including a steep 5 tenths downward revision to September to minus 0.6 percent. And it's not just gasoline! Nonpetroleum import prices fell 0.4 percent for the 10th decline in a row. Year-on-year, total import prices are down 10.5 percent, which is right in line with trend, with nonpetroleum down 3.4 percent for the largest drop since October 2009.
The story on the export side is the much same with export prices down 0.2 percent for a year-on-year decline of minus 6.7 percent. Excluding agricultural products, export prices fell 0.3 for a year-on-year decline of minus 6.1 percent.
Prices have been falling steadily for about a year in this report with declines also appearing for finished goods in what is a very important deflationary trend. Import prices for capital goods are down 2.3 percent year-on-year with vehicles down 1.6 percent and consumer goods down 0.6 percent. The export side is similar including a 2.4 percent year-on-year decline for consumer goods.
By country, contraction is steepest with Canada where import prices fell 1.0 percent in the month for a 20.5 percent year-on-year decline. Latin America is next, also down 1.0 percent in the month for a year-on-year decline of 14.7 percent. Import prices fell 0.1 percent with China where the year-on-year rate is minus 1.4 percent while prices with Europe actually rose 1 tenth in the month for a year-on-year minus 2.9 percent.
Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects generally deflationary global trends. Fed policy makers may be worried that slack has been absorbed in the labor market but they are also concerned about the continued lack of price pressure, the latter speaking against the urgency for a rate hike.
Market Consensus Before Announcement
Import & export prices have been in deep contraction and further contraction is expected. The Econoday consensus is calling for a 0.1 percent decline for import prices and a 0.3 percent decline for export prices. And it isn't all about oil, as non-petroleum import prices have also been in clear contraction. Year-on-year rates in this report have been deeply negative, just over double digits for import prices and just under double digits for export prices. Contraction in import prices reflects the strength of the dollar which has been giving U.S. buyers more for their dollars, while contraction in export prices reflects deflationary trends in the global price environment.
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.