US: Import and Export Prices

Thu Dec 10 07:30:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Import Prices - M/M change -0.8% -1.2% to 0.0% -0.4% -0.5% -0.3%
Export Prices - M/M change -0.3% -0.4% to 0.0% -0.6% -0.2% -0.2%
Import Prices - Y/Y change -9.4% -10.5%
Export Prices - Y/Y change -6.3% -6.7%

Cross-border price pressures remain negative with import prices down 0.4 percent in November and export prices down 0.6 percent. Petroleum fell 2.5 percent in the month but is not an isolated factor pulling prices down as non-petroleum import prices fell 0.3 percent in the month. Agricultural exports are the wildcard on the export side and they fell a sizable 1.1 percent but here too, the deflationary pull is widespread with non-agricultural export prices down 0.6 percent.

Year-on-year contraction is perhaps less severe than prior months but not by much. Import prices are down a year-on-year 9.4 percent with non-petroleum import prices at minus 3.4 percent. Import prices from Canada are down the heaviest, at minus 18.0 percent on the year, with Latin America next at minus 12.7 percent. Showing the least price weakness are imports from China at minus 1.5 percent. Export prices are down 6.3 percent on the year with non-agricultural prices down 5.7 percent.

Of special concern are continuing incremental decreases for prices of finished goods, both imports and exports. Federal Reserve policy makers have been waiting for an easing drag from low import prices, not to mention oil prices as well, with neither yet to appear. 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.

Market Consensus Before Announcement
Import & export prices have been in deep contraction and further contraction is expected. The Econoday consensus is calling for a steep 0.8 percent decrease for import prices as well as a sizable 0.3 percent decrease for export prices. Weakness in this report has not been confined to 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 in the high single 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 global prices.

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.