Import/Export Price Deflation: Export Prices -0.6%, Double Consensus Estimate; Import Prices -0.4% Half Estimate; Net Negative for GDP

Import/Export Price Deflation

Import/export price deflation continues in November. The kicker this month is a decline in exports prices greater than the decline in import prices with agricultural products leading the way, down a steep 1.1%.

The Bloomberg Econoday consensus estimate was for export prices to dip -0.3% and import prices to dip -0.8%.

The actual result was a dip in export prices twice as big as economists expected and export prices half as much as economists expected. oops.

Moreover, the decline in export prices was outside the -0.4% to 0.0% range of any individual estimate.

Year-over-year export prices are down 6.3% and import prices down 9.4%.

With that, let's check out the Econoday Report.

Cross-border price pressures remain negative with import prices down 0.4 percent in November and export prices down 0.6 percent. Petroleum fell 2.5 percent in the month but is not an isolated factor pulling prices down as non-petroleum import prices fell 0.3 percent in the month. Agricultural exports are the wildcard on the export side and they fell a sizable 1.1 percent but here too, the deflationary pull is widespread with non-agricultural export prices down 0.6 percent.

Year-on-year contraction is perhaps less severe than prior months but not by much. Import prices are down a year-on-year 9.4 percent with non-petroleum import prices at minus 3.4 percent. Import prices from Canada are down the heaviest, at minus 18.0 percent on the year, with Latin America next at minus 12.7 percent. Showing the least price weakness are imports from China at minus 1.5 percent. Export prices are down 6.3 percent on the year with non-agricultural prices down 5.7 percent.

Of special concern are continuing incremental decreases for prices of finished goods, both imports and exports. Federal Reserve policy makers have been waiting for an easing drag from low import prices, not to mention oil prices as well, with neither yet to appear. Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars.

Since exports add to GDP and imports subtract, today's numbers, in isolation, suggest further weakening in GDP estimates.

Mike "Mish" Shedlock