How do prices for U.S. manufacturing exports compare to prices for goods manufactured abroad? How has the balance of export and import prices between the United States and Mexico changed over time? BLS has new measures to answer these and other questions on the competitiveness of U.S. production. We have published data on import and export price indexes since 1973. Since then we have made many improvements to the data we provide. Our latest improvements are the locality of destination export price indexes and the U.S. terms of trade indexes.
What are the locality of destination indexes?
Each locality of destination index measures price changes in dollars for U.S. goods exported to another country, region, or group of countries. These include major U.S. trade partners like China and the European Union. The indexes are available for all goods and for manufacturing and nonmanufacturing goods industries for some localities. The locality of destination indexes are a counterpart to the locality of origin import price indexes, which we have published since 1990. The locality of origin indexes let us examine price trends for goods imported from other countries, regions, and groups of countries.
What do the locality of destination indexes tell us?
The locality of destination indexes show how export price movements can vary depending on where U.S. goods are sold. For instance, from August to September 2018, prices for manufacturing exports to Latin America increased 0.3 percent. During the same period, manufacturing export prices to the European Union did not change. Comparing the two price movements, we can conclude market prices for U.S. exports arriving in Latin America increased relative to exports bound for Europe. Identifying these trends allows data users to dig deeper to see how currency exchange rates or shifts in global supply and demand affect price movements across trade partners.
What are the terms of trade indexes?
Each terms of trade index measures the purchasing power of U.S. exports, in terms of imports, for a specific country, region, or group of countries. In other words, the terms of trade index for China provides information on the price for exports to China, and how those export prices compare to prices for imports coming from China. Prices for exports and imports are measured in U.S. dollars, so exchange rates are already taken into account. We calculate the terms of trade index for China by dividing the China export index by the China import index, then multiplying by 100. An increase in the China terms of trade index means prices for exports to China are rising faster than prices for imports from China.
What does a terms of trade index price change mean?
A change in a terms of trade index provides information on the competitiveness of U.S. goods in the global market. Take the previous example, an increase in the China terms of trade index. U.S. producers are receiving higher prices for exported goods, meaning U.S. companies can now afford to purchase more imports. The U.S. terms of trade—or competitiveness—with China have improved. When looking at the trends, remember that the types of goods U.S. businesses export to and import from China are different, and underlying price changes may have different causes.
How broad is the coverage of the terms of trade indexes?
We have terms of trade indexes for each country, region, or group of countries where we publish both a locality of destination export index and a locality of origin import index. These countries include major trading partners:
They also include regions or groups of countries:
- Industrialized Countries (Western Europe, Canada, Japan, Australia, New Zealand, and South Africa)
- European Union
- Latin America (Mexico, Central America, South America, and the Caribbean)
- Pacific Rim (China, Japan, Australia, Brunei, Indonesia, Macao, Malaysia, New Zealand, Papua New Guinea, Philippines, and the Asian Newly Industrialized Countries)
We publish the terms of trade indexes and the locality of destination indexes monthly. Data are available beginning with December 2017.
Why did we develop these new indexes?
The locality of destination and terms of trade indexes come from an ongoing effort to better measure the competitiveness of U.S. goods. We began expanding our measures of competitiveness in 2010 by extending the locality of origin import indexes to more detailed industries. Next we began work on the locality of destination and terms of trade indexes, eventually introducing them in September 2018.
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