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Category: Imports, Exports, Inflation and Trade
Date: 20 April 2020 One of the main drivers of inflation is inflation that is being imported, that is price increases of goods being imported. Sometimes the price of goods being imported or exported doesn't actually increase but the price paid increases or decreases due to exchange rate movements. So
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Import and export prices up to March 2020
U.S. import prices declined 4.1 percent from March 2019 to March 2020. The decrease was the largest over-the-year drop since the index fell 4.7 percent for the 12 months ended June 2016. Over the same time, U.S. export prices fell 3.6 percent, the largest 12-month decrease since a 4.5-percent decline from May 2015 to May 2016.
Import fuel prices fell 36.2 percent over the year ended March 2020; lower petroleum prices and natural gas prices both contributed to the decline. Prices for nonfuel imports decreased 0.5 percent for the year ended in March.
Prices for agricultural exports fell 2.2 percent over the year ended March 2020, the largest 12-month drop since the index decreased 5.3 percent for the year ended May 2019. Prices for nonagricultural exports fell 3.7 percent over the past 12 months, the largest over-the-year decrease since a 3.8-percent decline for the year ended June 2016.
Prices for agricultural exports fell 2.2 percent over the year ended March 2020, the largest 12-month drop since the index decreased 5.3 percent for the year ended May 2019. Prices for nonagricultural exports fell 3.7 percent over the past 12 months, the largest over-the-year decrease since a 3.8-percent decline for the year ended June 2016.
The image below shows the annual change in the import and export prices for the United States over the last 20 years. As the image shows in recent years the import and export price inflation has been very low and for large periods of time has actually been negative, which partly explains why the inflation rate of the United States is so low, and remains stubbornly low and below the FED target of around 2% a year. Part of the reason for this is the fact that the US dollar is so strong. With the strong exchange rate, imports remain relatively cheap and often becomes even cheaper as the exchange rate strengthens.