Import and Export Price Pressures Increase in September

Plant Money

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Global price pressures remained soft in September, according to import and export price data released by the U.S. Bureau of Labor Statistics on Wednesday. Generally speaking, inflationary pressures across the board have been weak — if present at all — and trade data suggest that the trend continued through the end of the third quarter.

The price index for imports increased 0.2 percent on the month in September following a 0.2 percent increase in August. Price pressure within imports was once again led by increases in fuel prices, which climbed 0.6 percent on the month following a 1.6 percent increase in the previous month. Non-fuel import prices climbed just 0.1 percent. On the year, import prices are down 1 percent.

Export prices climbed 0.3 percent in September, breaking a six-month decline and foiling expectations for a 0.1 percent decline. Export prices have declined for most of the past year and are down 1.6 percent compared to last September. Export prices have declined for both agricultural and nonagricultural products.

Inflation as measured by personal consumption expenditures — the preferred metric of the U.S. Federal Reserve — has averaged about 1.8 percent over the past three years, only slightly below the Fed’s target rate of 2 percent.

Given the recent political showdown in Washington and underwhelming labor market data, most economists and market participants are expecting the Fed to withhold tapering until 2014. This has pushed monetary policy to the back burner, as traders and investors can expect the Fed’s position to remain accommodative through the fourth quarter and, most likely, until the U.S. fiscal house no longer appears to be teetering on the edge of collapse.

Speaking in October, Federal Reserve Bank of Philadelphia President and CEO Charles Plosser said: “Fiscal drag, especially at the federal level, has weighed somewhat on economic growth over the past three quarters. In the fourth quarter of 2012, sharp declines in federal government spending subtracted 1.3 points from overall GDP, and in the second quarter, it subtracted 0.2 points. Most of the decline has been in national defense spending.”

Plosser also indicated that he was not concerned about the deflationary pressures that others have warned about.

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