Wednesday, May 13, 2009

Import & Export Prices – Going their Own Way…

This week is Inflation/deflation report week. It kicked off today with import/export data, and tomorrow we get the PPI followed by the CPI on Friday.

Let’s look at the trade price data for April:

Export prices in March -.6%.... in April +.5%, which shows PRICES increasing on the export side month over month.

On the Import side we find:

Import prices in March +.5%... in April +1.6% which shows that for the MONTH both import and export prices were rising.

Now, let’s look at YEAR over YEAR data:

This is the important story because it is year over year data that takes out the noise of monthly seasonal factors.

Year over Year EXPORT prices are -6.8% after being down -6.7% in March which shows that prices are falling faster on a year over year basis.

Year over Year IMPORT prices are down an AMAZING 16.3% (!!!!) after being down 14.9% year over year in March, again showing acceleration in price declines. Not the stuff of inflation, in fact quite the opposite. This is showing a historic price collapse.

So, let’s see how Econoday spins the data:
Price inflation is a story split in two, one is a commodity story, most notably energy, which is accelerating quickly, and the other is finished goods, which for now continue to contract. Import prices for April rose 1.6 percent, a fierce looking rate but reflecting energy where prices for petroleum imports jumped 15.4 percent. Judging by ongoing increases in oil, next month's report is also likely to show a major increase for petroleum. But excluding petroleum imports, prices fell 0.4 percent to extend a long run of declines connected to the global recession.

On the export side, export prices rose 0.5 percent but reflecting increases for another commodity sector, agriculture. Excluding a 3.6 percent jump in agricultural import prices, prices rose 0.3 percent.

So yes, commodities and especially oil has risen sharply in the past couple of months with this trumped up rally. BUT, prices have absolutely collapsed over the past year. These figures are very close to indicating a deflationary spiral. Let’s see what the PPI and CPI look like, it’s going to be interesting.

To me, there is no debate about what’s occurring right now given inflation or deflation. Deflation is occurring, the criminals are trying their hardest to rob you through inflation, but they are not succeeding – so far. So, you can believe whatever you want regarding inflation/deflation, but the data is not supporting the inflation thesis. Keep in mind that inflation/deflation is a monetary phenomena, not a PRICE phenomena. While the Fed’s monetary graphs show increasing money supply, it’s what they don’t show that has so many people fooled. That being the collapse of the shadow banking process and CREDIT (not to mention collapsing velocity!).

I just wish the central bankers would go their own way!