Inflation Is Nonexistent in November Trade Data



Global price pressures remained weak in November, according to trade data released by the Bureau of Labor Statistics on Thursday. Overall, inflationary pressures across the board have been weak — if present at all — over the past several months, and trade data suggest that the trend continues.

The price index for imports decreased 0.6 percent on the month, comparable to the revised decrease for October. The decline was once again led by a sharp decrease in the price of fuel imports, which fell 3.1 percent on the month. Excluding fuel, import prices were flat in November, following a 0.1 percent increase in October. Compared to the same period last year, overall import prices are down 1.5 percent, fuel import prices are down 2.7 percent, and non-fuel import prices are down 1.2 percent.

The price index for exports increased 0.1 percent in November, which follows a 0.6 percent contraction in October. Export prices have declined for most of the past year and are down 1.6 percent compared to November 2012. Agricultural export prices are down 6.7 percent on the year, while nonagricultural export prices are down 1 percent.

Investors have kept inflation data in their periphery recently because of the Federal Reserve’s aggressive stimulus program. Quantitative easing — the name given to the Fed’s ongoing purchases of agency mortgage-backed securities and longer-term Treasury securities — has four primary effects on the economy: higher inflation expectations, currency depreciation, higher equity valuations, and lower real interest rates.

Most of these effects have manifested in the United States to some degree, but inflation data released over the past few months have struggled to remain positive. James Bullard, president of the Federal Reserve Bank of St. Louis, said in a recent presentation to the CFA Society in St. Louis that inflation “continues to surprise to the downside.”

Soft but positive inflation is something to keep an eye on but nothing to write home about. Still, there have been some concerning signs recently. In October, the consumer price index for all urban consumers (CPI-U) contracted to a seasonally adjusted 0.1 percent in October. This was the first contraction of the headline inflation index in six months, and it took many economists, who were expecting the index to flat line, by surprise.

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