US: Import and Export Prices

Thu Aug 11 07:30:00 CDT 2016

Consensus Consensus Range Actual Previous Revised
Import Prices - M/M change -0.4% -0.7% to 0.1% 0.1% 0.2% 0.6%
Export Prices - M/M change 0.2% 0.8%
Import Prices - Y/Y change -3.7% -4.8%
Export Prices - Y/Y change -3.0% -3.5%

Cross-border price pressures continue to show some life. The July headline for import prices is up only 0.1 percent but when excluding petroleum, where prices fell back sharply following a series of double-digit monthly gains, prices rose 0.5 percent. The 0.5 percent gain doesn't look staggering but it is the sharpest gain in more than five years, since April 2011.

Pressure on the import side is centered in food prices which jumped 3.3 percent in the month with the year-on-year rate for food moving back into the plus column to 1.4 percent. Non-petroleum industrial supplies also show pressure, up 2.1 percent in the month. Petroleum prices fell 3.6 percent with a drop in crude offsetting a big swing higher for natural gas.

Turning to the export side of the report, export prices rose 0.2 percent but here too the core reading, which for exports excludes both food and energy, shows a bit more pressure at plus 0.3 percent. Year-on-year, export prices improved slightly but still remain negative at minus 3.0 percent with import prices also showing improvement but also negative at minus 3.7 percent.

Global demand is holding steady and is perhaps firming slightly based on today's price report. Watch for producer prices on tomorrow's calendar and on next week's calendar the key consumer price report where several months of pipeline price pressure have yet to appear.

Market Consensus Before Announcement
Import prices are expected to fall back in July as petroleum prices eased, down a consensus 0.4 percent. Outside of petroleum, import prices have shown only isolated pressure this year and no pressure yet on finished goods 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 compiled 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.