The US Import and Export Price Indexes are monthly measurements of the average changes in prices of goods and services that are imported or exported. The data comes from surveys of both importers and exporters in the United States. The merchandise price indexes are published using three classification systems. Items are classified by end use according to the Bureau of Economic Analysis Classification System, by industry according to the North American Industry Classification System (NAICS), and by product category according to the Harmonized System (HS). Import prices are based on US dollar prices paid by the US importer, and can either include or not include the costs of shipping to a US port, depending on the practices of the individual industry. For exports, the prices used are generally either “free alongside ship” (f.a.s.) factory or “free on board” (f.o.b.) transaction prices which means that they are priced prior to including the cost of shipping to the foreign country. The indices are set so that they use a base year of 2000=100 where possible.
According to the BLS, prices for US imports were unchanged in December, following declines of 0.9 percent in November and 0.6 percent in October. In December, higher fuel prices offset declining nonfuel prices. U.S. export prices advanced 0.4 percent in December, after edging up 0.1 percent the previous month. Fuel prices are particularly important since they represent about one-fifth of total imports by value. The price of most imported products except for foods fell over the course of the year, while the overall prices of most exports were flat. Interestingly, export prices for food and agricultural products fell dramatically last year.
The differences in the price indexes for exports versus imports are due to the fact that the United States is still fairly dependent on the import of commodity products (particularly oil). The demand for these products is fairly inelastic in the short term (you have to heat your house), while the products that it exports be they higher end foodstuffs, or industrial equipment, are more dependent on economic cycles. The American economy is actually growing faster than the rest of the world right now, so world demand for commodities has been fairly weak. This has kept a lid on overall import prices in the short term. On the other hand, the weak world economy keeps a lid on overall US export prices since the demand for products like aircraft, industrial equipment and beef is not strong. Exporters cannot increase margins and continue to keep markets. This should turn around as the world economy strengthens; however, this same strengthening will force up prices of commodity products in dollar terms as well.
This dichotomy between import and export prices will grow if, as they have telegraphed, the Board of Governors of the Federal Reserve decides to start to rein in the loose monetary policy. This will begin to strengthen the dollar relative to other currencies, continuing to hold down import prices, while raising prices on exports.
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