Import Prices Drop 0.3 Percent, Export Prices Plunge 0.7 Percent

Economists did not see this one coming. The consensus for export prices was -0.1 percent. And there was a negative revision to export prices.

The BLS Import-Export Price Report put a spotlight on very bad news for exporters

Import Prices Key Points

• The price index for U.S. imports fell 0.3 percent in August, after ticking up 0.1 percent from April to July. The August decline was the largest monthly drop since the index decreased 0.7 percent in December 2023.
• Fuel Imports: Import fuel prices decreased 3.0 percent in August, after increasing 1.1 percent the previous month. The August drop was the largest 1-month decline since the index fell 8.0 percent in December 2023. Prices for import petroleum fell 3.2 percent in August, the largest monthly drop for the index since December 2023. Petroleum prices declined 3.2 percent over the past 12 months, the largest over-the-year decrease since January 2024. The price index for import natural gas declined 3.7 percent in August following a 2.0-percent advance in July. Natural gas prices fell 51.7 percent over the past year, the largest 12-month drop since January 2024.
• All Imports Excluding Fuel: Prices for nonfuel imports edged down 0.1 percent in August, after increasing 0.1 percent in July and 0.2 percent in June. Lower prices in August for nonfuel industrial supplies and materials; consumer goods; and foods, feeds, and beverages more than offset higher capital goods prices.
• Foods, Feeds, and Beverages: The price index for foods, feeds, and beverages fell 0.1 percent in August following a 1.5-percent advance the previous month. Lower prices for feedstuff and food grains contributed to the decrease in foods, feeds, and beverages prices.
• Nonfuel Industrial Supplies and Materials: Nonfuel industrial supplies and materials prices decreased 0.4 percent in August, after edging down 0.1 percent in July. Lower prices in August for unfinished metals and agricultural products used for industrial supplies and materials drove the overall decrease.
• Finished Goods: Prices for the major finished goods import categories were mixed in August. Capital goods prices ticked up 0.1 percent, after being unchanged in July. Higher prices for industrial and service machinery and semiconductors led the August advance. In contrast, prices for consumer goods edged down 0.1 percent in August, after declining 0.2 percent in each of the previous 2 months. The August decrease was led by lower prices for gem diamonds and for toys, shooting, and sporting goods. The price index for automotive vehicles was unchanged in August following a 0.4-percent increase in July.

Export Prices Key Points

• U.S. export prices declined 0.7 percent in August following a 0.5-percent increase the previous month. Lower prices for nonagricultural and agricultural exports each contributed to the decrease in U.S. export prices in August.
• Agricultural Exports: The price index for agricultural exports declined 2.0 percent for the second consecutive month in August. The August and July drops are the largest 1-month decreases since the index fell 2.3 percent in May 2023. A 9.8-percent decline in soybeans prices led the August drop. Lower prices for corn, wheat, and fruit in August also contributed to the decrease in agricultural prices.
• All Exports Excluding Agriculture: Nonagricultural export prices decreased 0.6 percent in August following a 0.8-percent advance the previous month. Lower prices in August for nonagricultural industrial supplies and materials and for capital goods more than offset higher prices for consumer goods, automotive vehicles, and nonagricultural foods.
• Nonagricultural Industrial Supplies and Materials: Prices for nonagricultural industrial supplies and materials declined 1.1 percent in August, after advancing 1.9 percent in July. The August drop was mostly driven by a 2.9-percent decrease in export fuel prices.
• Finished Goods: Prices for the major finished goods export categories were mixed in August. The price index for capital goods fell 0.2 percent, the first monthly decline for the index since November 2023. A 3.0- percent drop in semiconductor prices led the August decrease. In contrast, consumer goods prices rose 0.1 percent in August following decreases of 0.1 percent in July and 0.3 percent in June. Prices for automotive vehicles advanced 0.1 percent in August, after increasing 0.3 percent the previous month. Higher prices for trucks, buses, and special purpose vehicles in August drove the rise in automotive vehicles prices.

Import Price Changes M/M and Y/Y

Import Price Y/Y Details

• import prices increased 0.8 percent over the past year. U.S. import prices last fell on a 12-month basis in February 2024.
• Petroleum prices declined 3.2 percent over the past 12 months, the largest over-the-year decrease since January 2024. The price index for import natural gas declined 3.7 percent in August following a 2.0-percent advance in July. Natural gas prices fell 51.7 percent over the past year, the largest 12-month drop since January 2024.
• Nonfuel import prices advanced 1.3 percent over the past 12 months, and last declined on an over-the-year basis in February 2024.

Import Price Changes M/M and Y/Y

Export Price Y/Y Details

• U.S. export prices fell 0.7 percent for the year ended in August, the first over-the-year drop since April 2024.
• Prices for agricultural exports fell 6.9 percent over the past year.
• Nonagricultural export prices fell 0.1 percent for the year ended in August, the first 12-month decrease for the index since a 0.7-percent decline in March 2024.
• Nonagricultural industrial supplies and materials prices fell 1.6 percent over the past year, the largest 12-month decline since March 2024.

Bloomberg Economist Consensus Expectations

• Import prices declined 0.3 percent vs expectations of a 0.2 percent decline. There were no revisions.
• Export prices plunged 0.7 percent vs the expected decline of 0.1 percent. Factoring in revisions, the miss was 0.8 percent.

Impact on GDP

In isolation, declining import prices are good for the trade deficit.

In isolation, falling export prices are bad for the trade deficit.

I say, “in isolation” because the net result depends on the total volume of imports and exports.

The impact on GDPNow depends on what the model expects, not the report itself.

However, the discrepancy in this case is so large, and coupled with negative revisions on export prices, that the report rates to be net negative to GDP as I see it. In other words, my guess is the data is worse than what the model expects.

Reflections on Import and Export Prices

Year-over-year import prices were negative from February 2023 until February of 2024.

Consumers were undoubtedly happy over this tiny bit of inflation reduction.

However, Trump must not happy with falling import prices because he proposes massive tariff hikes of 60 percent on imports and 10 or 20 percent elsewhere.

Recent Rally in Crude

Yesterday, I commented What’s Behind the Recent Rally in Crude, Looking Ahead What’s Next?

I expect the bounce in crude to be short lived. It’s mostly a technical bounce off weakening support.

Falling prices are a sign of a weakening global economy. And there is no reason to believe a quarter point cut here and there will fix anything.