The BLS reports the U.S. Import and Export Price Indexes both advanced in July.

All Imports

U.S. import prices continued to advance in July, ticking up 0.1 percent. Prices for imports have not recorded a monthly decrease over the past 5 months and increased 3.0 percent since last declining in February. Prior to July, the increases were driven by rising fuel prices. In contrast, in July, nonfuel prices led the advance and fuel prices recorded a decrease. Despite the recent increases, import prices remain down on an over-the-year basis, falling 3.7 percent over the past 12 months. Import prices have not recorded a 12-month advance since 2 years ago when the index rose 0.9 percent between July 2013 and July 2014.

All Imports Excluding Fuel

The price index for nonfuel imports rose 0.3 percent in July following a 0.2-percent drop in June and a 0.3-percent advance in May. The 0.3-percent increases were the largest 1-month advances since the index rose 0.3 percent in March 2014. The last time the index increased more than 0.3 percent was a 0.4-percent rise in March 2012. The July advance was led by higher prices for nonfuel industrial supplies and materials; and foods, feeds, and beverages. In contrast, import finished goods prices decreased in July. Prices for nonfuel imports declined 1.2 percent over the past year.

Fuel Imports

Fuel prices decreased 2.5 percent in July, the first monthly decline since the index fell 6.8 percent in February. Before the downturn, import fuel prices rose 47.1 percent from February to June. In July, a 3.6-percent drop in petroleum prices drove the downturn in fuel prices and more than offset a 31.4 percent increase in the price index for natural gas. Prices for import fuel decreased 22.3 percent for the year ended in July. A 23.1-percent decline in petroleum prices over the period and a 17.5-percent drop in natural gas prices each contributed to the overall fall in fuel prices.

All Exports

Prices for U.S. exports increased 0.2 percent in July, after rising 2.4 percent over the 3 previous months. In July, higher nonagricultural prices more than offset a decrease in agricultural prices. The price index for exports last recorded a 1-month decline when the index edged down 0.1 percent in March. Even accounting for the recent advances, export prices declined 3.0 percent over the past 12 months and have not increased on an over-the-year basis since the index advanced 0.4 percent in August 2014.

All Exports Excluding Agriculture

Nonagricultural prices increased 0.3 percent in July following a 0.5 percent advance the previous month. In July, rising prices for nonagricultural industrial supplies and materials as well as consumer goods drove the overall rise. Prices for nonagricultural exports fell 3.0 percent over the past 12 months and declines for each of the major end-use categories contributed to the decrease from July 2015 to July 2016.

Agricultural Exports

The price index for agricultural exports declined 0.4 percent in July, after rising 2.6
percent in June, 3.0 percent in May, and 0.8 percent in April. The downturn in July was led by an 8.5-percent decrease in corn prices; lower wheat prices also contributed to the overall decrease. Agricultural export prices fell 2.6 percent for the year ended in July, driven primarily by falling prices for nuts, wheat, and corn.

The Spin

Bloomberg Econoday cheers the action.

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.

What Happened?

Rising energy prices filtered into rising prices in general. Energy prices are declining once again.

This action appears to have more to do with energy prices that snapped back after a very steep plunge than a clear signal that global demand is strengthening.

Mike “Mish” Shedlock