Inflation Is Nowhere to Be Found in October Trade Data

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Global price pressures remained weak in October, according to import and export price data released Friday by the U.S. Bureau of Labor Statistics. Generally speaking, inflationary pressures across the board have been weak — if present at all — and trade data suggest that the trend continued into the beginning of the fourth quarter.

The price index for imports decreased 0.7 percent on the month, a decline that was greater than expected and that follows a meager 0.2 percent increase in September. The decline was led by a 3.4 percent plunge in fuel prices, which follows a 0.4 percent fuel price increase in September. Excluding fuel, import prices were flat in October. Compared to the same period last year, overall import prices are down by 2 percent. Non-fuel import prices are down 1.3 percent on the year, and fuel import prices are down 3.8 percent.

The price index for exports fell a greater-than-expected 0.5 percent on the month in October. Export prices have declined for most of the past year and are down 2.1 percent on the year. Agricultural export prices are down 6.1 percent, while nonagricultural export prices are down 1.6 percent.

The Bureau of Labor Statistics noted that while data collection for the October report was delayed because of the partial government shutdown, the reference period was unchanged.

At the end of October, the BLS reported that its seasonally adjusted Consumer Price Index for All Urban Consumers, or CPI-U, increased by 0.2 percent on the month in September. This was in line with economist expectations and consistent with the generally soft price pressures experienced over the past several months. Headline consumer prices are up 1.2 percent on the year.

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 U.S. to some degree, but inflation data released over the past few months have come in surprisingly soft. Before the CPI-U data were released, the BLS reported that its index for producer prices actually decreased 0.1 percent on the month. The PPI interprets price changes from the perspective of the seller and can be used as a leading indicator of inflation because it measures input price pressure.

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