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July 18, 2017 | Import Prices Dip as Expected, Export Prices Unexpectedly Dip: GDP and Forex Analysis

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

The BLS’ Import and Export Price Report for June shows Import and Exports prices both declined 0.2% from May. Econoday economists called import prices correctly but expected export prices would be flat.

Month-Over-Month Changes

I reordered the charts in the BLS report to highlight what’s important for GDP purposes.

Imports subtract from GDP while exports add to GDP. With export prices falling more, this report is decidedly net negative for second quarter GDP.

Year-Over-Year Changes

Select Import Prices

Petroleum accounts for most of the import price drop. Other pockets of weakness include automotive vehicles and consumer goods. Prices of agricultural foods feeds, and beverages rose 1.1%

Select Export Prices

Foods, feeds, and beverages account for only 8.8% of exports but that category accounts for nearly all the drop in export prices for both May and June.

US Dollar Effect

The US dollar index peaked in December of 2016 at 103.81. Today the US dollar index sits at 94.46. That’s a decline of 9 percent over 1.5 years.

A falling dollar is supposed to boost exports, making them cheaper. Charts prove that expected boost did not happen.

Balance of Trade

Balance of Trade vs. First Quarter

Compared to the first quarter, the trade deficit is running slightly higher on average.
For more details, please see Balance of Trade Deficit Near Expectations: Analyzing the Impact on Second Quarter GDP.

Mike “Mish” Shedlock

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July 18th, 2017

Posted In: Mish Talk

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