May Import and Export Prices Keep Deflation Worries Alive

Are we supposed to be worrying about inflationary pressures or deflationary pressure in the months ahead? That answer is one in which beauty is in the eye of the beholder. Import and export prices signaled a slightly mixed picture during the month of May.

The Labor Department reported that import prices in the United States rose by 0.1% from the prior month. Dow Jones and Bloomberg were both calling for a 0.2% gain on the headline. If compared to a year ago instead of April, import prices were up by 0.4%.

Where this picture is mixed is that the gain is from petroleum and energy, with imported petroleum prices up 1.1%. Non-petroleum import prices were actually down by 0.1% in May. Imported food prices were down by 0.8%, but that was up almost 3% from May of 2013.

Export prices also lagged estimates in May with a mere 0.1% gain. The consensus from Bloomberg was for a gain of 0.2%. On a year-over-year basis, May’s export prices were actually up by 0.5%.

The European Central Bank just recently adopted a negative interest rate environment for its form of quantitative easing measures. Its fear is not inflation, but deflation. Inflation in the United States has started to see some light, but the numbers are still under the FOMC’s 2% inflation target.

It is not an easy task when you are trying to fight deflation and inflation just won’t find its way into the market.

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