Analyzing the changes in import prices compared to the change in export prices can give us several key insights into the current health of the economy. Changes in import prices help us to see where inflation is at or is headed, if import prices are increasing, it can be a signal that inflation is increasing. Increasing export prices can indicate an increase in demand for a country’s goods and services, which could increase GDP and strengthen the economy if the trend for export prices continues higher. Comparing changes in prices for imports and exports helps us to see where the nation is at with our trade balance. If imports are increasing at a much higher rate than exports, the trade deficit will increase, adding to the nation’s debt. The comparison can also give us a look into how the nation’s supply chain is operating, and whether we are facing significant issues or not.
The import and export price changes for September were just released and they show that prices in exports fell almost twice as much as their imported counterparts. This is the second straight month where both have fallen heavily, and the second straight month where the decrease in export prices was far greater than the decrease in import prices.
This decrease in import prices was mostly driven by a large drop in fuel prices, which fell 7.1% in the month of September. This was the largest single month decrease in fuel prices of 2024, and it came right on the heels of a 2.9% drop in August. If you take out fuel price changes, import prices actually increased 0.1% in September, this is the third straight month of gains for import prices when you exclude fuel prices. Import costs have fallen 0.1% year over year including fuel, and climbed 1.8% if you take fuel prices out of the equation. In analyzing the effects of current import prices on inflation, Matthew Martin of Oxford Economics gave an optimistic outlook, "Import prices do not feed through directly to producer and consumer prices but are a signal inflationary pressures remain muted and adds some support to another rate cut in November," In his mind, import prices aren’t pushing inflation up and they currently bode well for a November rate cut.
For export prices, September’s 0.7% decline followed August’s 0.9% decline. For the third quarter as a whole, export prices fell 1.1%, the largest three month decline in almost a year. Export prices are down 2.1% year over year in September, mostly due to decreasing prices in nonagricultural exports. The decrease in export prices could be somewhat due to the fact that the U.S. dollar had a rough month in comparison to the currency of the United State’s main trade partners. However, the dollar did recover a bit towards the end of the month.
These readings will be very interesting to watch in the aftermath of the upcoming election; the differences in fiscal policy between the two candidates will play a big role in the changes of import and export prices. For instance, President Trump has several plans for tariffs, specifically imposing tariffs on Chinese imports. This may increase the prices of imports by a large margin. Vice President Harris also has plans for higher taxes on corporations, this higher cost of doing business may get passed on to the consumer via higher prices. This could also have strong effects on the prices of imports and exports. Policies such as this need to be on the forefront of investors' minds as we move into a new administration, or a slightly different one than what we currently have.
Comments