Import and export prices continue to indicate slightly deflationary pressures in cross-border trade. Import prices fell 0.4 percent on the month in November after falling 0.6 percent in October; on the year, import prices were down 1.4 percent for the 10th straight negative showing. Export prices were down 0.9 percent for the second month in a row with annual contraction at 5.2 percent, also the 10th straight negative showing.

Comparatively low petroleum-related prices have been behind much but not all of the downswing. Excluding fuels, import prices rose 0.2 percent on the month in November which, however, is only the first gain since February this year. The annual rate for this reading has been in contraction since March this year, at minus 0.4 percent in November. Note that imported prices for petroleum and related products fell 7.1 percent on the month in November and were down 9.2 percent on the year.

Prices for finished goods were flat to down across the board in November including a 0.1 percent monthly decline for imported autos, perhaps a surprise given strong US demand for this category. This report is a positive for the inflation outlook and by extension pulls forward, in theory at least, the beginning of rate cuts by the Federal Reserve.

Import prices fell a steeper-than-expected 0.8 percent in October with November's expectations at a 0.7 percent decline. Export prices, which in October fell 1.1 percent, are expected to fall 1.0 percent.

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, which exclude tariffs and taxes, measure underlying 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.