Academic journal article Monthly Labor Review

U.S. Import and Export Prices in 2004: Import and Export Prices Increased at an Accelerated Rate in 2004, as Each Continued the Upward Trend That Began in 2002; the Increases for Both Indexes Were Driven by Industrial Supplies and Materials, Which Trended Upward Because of Higher Fuel and Raw Material Prices

Academic journal article Monthly Labor Review

U.S. Import and Export Prices in 2004: Import and Export Prices Increased at an Accelerated Rate in 2004, as Each Continued the Upward Trend That Began in 2002; the Increases for Both Indexes Were Driven by Industrial Supplies and Materials, Which Trended Upward Because of Higher Fuel and Raw Material Prices

Article excerpt

The Bureau of Labor Statistics import and export price indexes both increased for a third consecutive year in 2004. Import prices were up 6.7 percent for the year, almost triple the 2.4-percent increase seen in 2003. Export prices saw the highest increase in 15 years with a 4.0-percent advance in 2004; the increase in the previous year was only 2.2 percent.

Prices within the industrial supplies and materials index had the most impact on the import side, increasing 22.0 percent for the year. The industrial supplies and materials price index comprises the fuel price index, which increased 31.5 percent, and the nonfuel industrial supplies and materials price index, which increased 13.4 percent. Import prices were up in all major categories, with the exception of the capital goods index. Downward movements for computer, peripheral, and semiconductor prices caused the contrasting trend in the capital goods index. On the export side, annual price increases were posted for each of the major indexes, except for the foods, feeds, and beverages price index, which decreased 4.5 percent. Similar to the import price index, the largest movement in the export price index was seen in the nonagricultural industrial supplies and materials price index, which posted a 16.6-percent increase in 2004. (See table 1.)

The key factor behind the substantial import and export price movements in 2004 was the growth in international demand, especially from China, for raw materials such as petroleum and steel. According to statistics from China's Customs Bureau, the total value of imports into China increased 36 percent. Import increases were most significant in iron ore and fine mine products (161.8 percent), crude oil (71.4 percent), unwrought copper (37.9 percent), and plastics (31.5 percent). (1) China's demand for these raw materials led to tight global supplies and higher international prices, which put additional upward pressure on prices for manufactured goods.

Changes in the exchange rate were also a factor behind the increases in import prices, as the U.S. dollar weakened against the currencies of several major trading partners. In 2004, the exchange rate decreased between the U.S. dollar and the United Kingdom (UK) pound (10.2 percent), the euro (9.1 percent), the Canadian dollar (7.8 percent), and the Japanese yen (3.8 percent). The U.S. dollar, which has been weakening for 2 years, put upward pressure on prices of goods imported from these countries, which in 2004 accounted for 45.5 percent of the total dollar value for goods imported into the United States. (2)

Other price measures

The Consumer Price Index (CPI) and the Producer Price Index (PPI) increased at an accelerated rate in 2004 because of higher energy costs. The CPI measures monthly changes in the prices paid by urban consumers for a representative basket of goods and services. After posting an increase of 1.9 percent in 2003, the CPI for All Urban Consumers (CPI-U) rose 3.3 percent in 2004, the largest increase since 2000. The increase was driven by a 16.6-percent gain in energy prices and a 2.7-percent gain in food prices. Excluding food and energy prices, the index increased at a lesser rate of 2.2 percent.

The PPI measures monthly changes in the selling prices received by domestic producers for their output. The PPI for finished goods increased 4.2 percent in 2004, slightly above the 4.0-percent advance in 2003. The 4.2-percent advance in the PPI was the largest movement published since 1990, when the index gained 5.7 percent). (3) The increase in 2004 was boosted by a 13.4-percent increase in energy prices and a 3.1-percent increase in food prices. Excluding food and energy prices, overall producer prices increased a more modest 2.3 percent. (See chart 1.)

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Import price trends

Energy. Increases in energy prices were the most significant factor in import prices in 2004. The price index for petroleum and petroleum products increased 30. …

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