June 15, 2017 – Import prices tell us the cost of products that are produced abroad and purchased in the U.S., while exports are goods produced in the U.S. but purchased abroad.
Import prices in May changed -0.3%, 0.2% less than the consensus of a -0.1% change. April’s import price change of -0.5% was revised to 0.2% (-0.3%). These past 12 months import prices increased by 2.1%, a smaller increase from the previous revised 3.6% (-1.5%). Export prices dropped by 0.7% in May, far below the consensus expectations of 0.1% (-0.6%). Export year-over-year prices have risen by 1.4% from the prior revised 3.2% (-1.8%).
Import prices had the largest monthly drop since February last year. This was driven by the fuel imports down 3.7% coupled with no change in nonfuel imports. An important note is that fuel imports are still up 16.9% year-over-year. While the gap between imports and exports narrowed for March and April after revisions, it has increased again in May. Price weakness is not a good sign for this quarter’s GDP and trade balance. After the Fed rate hike the dollar should strengthen for a short time increasing imports as a result. However, if the dollar follows the trend after the last two rate hikes it should flatten out afterwards.