Topic Archives: Inflation and Prices

New Measures of Prices for Global Trade

Shipping containers sitting on a dock at a port.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:

  • Canada
  • Mexico
  • Germany
  • China
  • Japan

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.

Want to learn more?

The Griswold Family Vacation through the Lens of BLS Data

We have a guest blogger for this edition of Commissioner’s Corner. Joy Langston is a budget analyst at the U.S. Bureau of Labor Statistics. She enjoys watching classic movies when she’s not working.

As summer wraps up, let’s slow the transition into cooler weather to explore the dream American summer vacation of the Griswold family. America first met the Griswolds in the cult classic National Lampoon’s Vacation. We’ll relive their vacation through the lens of our gold-standard data. Clark Griswold, the easygoing and optimistic patriarch of the family, wants a fun vacation with his wife, Ellen, and adolescent son and daughter, Rusty and Audrey, before the kids grow up. For the past 15 years, Clark has worked as a food scientist creating “new and better food additives.” Data from the 2017 Employee Benefits Survey show that after 10 years of service, full-time workers like Clark receive on average 18 days of vacation, or almost 4 weeks.

Since he has the time, Clark decides to lead the family on a cross-country expedition from the Chicago suburbs to Walley World — “America’s Favorite Family Fun Park” in Southern California. Ellen agrees to the destination but wants to fly, as it will be less of a hassle. However, data from the Consumer Expenditure Surveys suggest driving may not be a bad idea. The average amount a household spent on vacations was $2,076 in 2017, with $684 for transportation costs, so flying from Chicago to Southern California was likely not in the Griswolds’ budget. To jumpstart this trip, Clark ordered the new “Antarctic Blue Super Sports Wagon with the Rally Fun Pack” from the local car dealership. He is scammed into buying the far less appealing, but now iconic, metallic pea, wood grained trimmed station wagon instead. Nevertheless, Clark is determined to make this the best family vacation ever.

Eventually, Ellen gives in to her husband’s enthusiasm and the Griswolds embark on their adventure, but not before stopping for their first tank of gas. You may remember that Clark struggled to find the gas tank, which was ridiculously located under the hood, by the engine, on the passenger’s side. The average household spent $109 in 2017 on gas for out-of-town trips and $1,797 for all uses. In July 2018, the national average price of gas was $2.93 per gallon, according to the Consumer Price Index. Although America has traded in station wagons for SUVs, neither are gas efficient and the Griswolds probably had to fuel up frequently on the 2,460-mile drive.

The family’s first misstep includes taking the wrong exit in St. Louis, Missouri, where they lose a couple of car parts while stopping to ask for directions in a questionable neighborhood. Despite this portrayal of St. Louis, the Occupational Employment Statistics data show this metro area had about 1.4 million jobs in 2017. About 16 percent of them were in office and administrative support occupations, with an average wage of $37,720 per year. Another 10 percent of jobs were in sales and related occupations, and 7 percent were in healthcare practitioners and technical occupations.

Driving through Kansas, they stop in Dodge City to experience life in the Wild West and order drinks in a saloon. According to the Current Employment Statistics survey, stops like these, including historical sites and other historical institutions, provide an average of 69,000 jobs from May to August nationwide.

The Griswolds make it to Coolidge, Kansas, where Ellen’s cousins live. The cousins pressure Clark and Ellen into dropping off cantankerous Aunt Edna — and her equally feisty dog — at her son’s home in Phoenix, Arizona. According to the American Time Use Survey Americans spend an average of 39 minutes a day — or about 237 hours a year — socializing and communicating in person. The survey also shows that Americans spend an average 4 minutes a day caring for and helping nonhousehold adults. The Griswold family gets a concentrated dose of this social activity by adding Aunt Edna to their road trip party.

For lunch, they stop off at rest stop to enjoy some homemade sandwiches. The average American household spent $56 in 2017 on food prepared for out-of-town trips, and $3,365 on food away from home (including fast food establishments and full service restaurants). The Griswolds’ enjoyment is cut short when they realize there is more to their soggy baloney cheese sandwiches than they bargained for. As it turns out, Aunt Edna’s spiteful dog used the picnic basket as a bathroom during the car ride. If you’re driving with a pet and want to avoid this mishap, Kansas has more than 4,600 restaurants and eating places to choose from, according to the Quarterly Census of Employment and Wages.

They spend the night in one of Colorado’s 98 campgrounds in three large, smelly tents. Despite their positive attitudes the next morning, the Griswolds meet with more misfortunes, including being pulled over by a state trooper, Ellen losing her bag with the credit cards, quarrels over their dwindling cash supply, and crashing in the Arizona desert while trying to find a shortcut to the Grand Canyon. After they are rescued and towed to a service station, Clark haggles with the local mechanic, who doubles as the local sheriff, and takes the rest of Clark’s cash. The average American household spent $954 on car maintenance and repairs in 2017, although costs usually are spread throughout the year and not on vacation misadventures.

By the time they drop off Aunt Edna in Phoenix, Ellen and the kids are begging Clark to buy plane tickets to go back home. However, Clark’s enthusiasm hasn’t waned, and he declares this road trip a pilgrimage.

When they finally arrive at Walley World, they discover it is closed for the next two weeks for repairs. Exasperated, Clark demands the security guard open the gates and let the family into the park. After a couple rollercoaster rides, the SWAT team and owner of the park, Roy Walley, arrive. As the police put handcuffs on Clark’s family, Clark begs Roy not to press charges. Clark persuades Roy not only to drop the charges but to allow the family to stay and enjoy all the rides! Americans do love their theme parks. There were nearly 1,000 theme parks in the United States in 2017, with 87 of them in California. These parks provided 185,000 jobs nationwide. This industry increased its labor productivity 13.7 percent in 2017, as theme parks reported higher output while hours worked by employees decreased.

Over the course of their trip, the Griswolds share a number of experiences, many of which either hit a little too close to home, or we hope to never experience for ourselves. After a long and tiresome trip, we hope Ellen finally has her way and Clark doesn’t force the Griswolds to spend another two weeks driving back to Chicago, which would deplete all his vacation days! This classic summer movie shows that BLS really does have a stat for that!

A Clearer Look at Response Rates in BLS Surveys

Hands holding a tablet computer and completing a surveyPeople know BLS for our high-quality data on employment, unemployment, price trends, pay and benefits, workplace safety, productivity, and other topics. We strive to be transparent in how we produce those data. We provide detailed information on our methods for collecting and publishing the data. This allows businesses, policymakers, workers, jobseekers, students, investors, and others to make informed decisions about how to use and interpret the data.

We couldn’t produce any of these statistics without the generous cooperation of the people and businesses who voluntarily respond to our surveys. We are so grateful for the public service they provide.

To improve transparency about the quality of our data, we recently added a new webpage on response rates to our surveys and programs. We previously published response rates for many of our surveys in different places on our website. Until now there hasn’t been a way to view those response rates together in one location.

What is a response rate, and why should I care?

A response rate is the percent of potential respondents who completed the survey. We account for the total number of people, households, or businesses we tried to survey (the sample) and the number that weren’t eligible (for example, houses that were vacant or businesses that had closed). Response rates are an important measure for survey data. High response rates mean most of the sample completed the survey, and we can be confident the statistics represent the target population. Low response rates mean the opposite, and data users may want to consider other sources of information.

Do response rates tell the whole story?

A low response rate may mean the data don’t represent the target population well, but not necessarily. How much a low response rate affects how well the estimates represent the population is called nonresponse bias. Some important research by Robert M. Groves and Emilia Peytcheva published in the January 2008 issue of Public Opinion Quarterly looked at the connection between response rates and nonresponse bias in 59 studies. The authors found that high response rates can reduce the risk of bias, but there is not a strong correlation between response rate and nonresponse bias. Some surveys had a very low response rate but did not have evidence of high nonresponse bias. Other surveys had high nonresponse bias despite high response rates.

This means we should look at response rates with other measures of data quality and bias. BLS has studied nonresponse bias for many years. We have links to many of those studies in our library of statistical working papers.

What should I be looking for on the new page?

With response rates from multiple surveys in a single place, you can look for patterns across surveys and across time. For example, across every graph we see that response rates are declining over time. This is happening for nearly all surveys, government and private, on economic and other topics. It is simply getting harder to persuade respondents to answer our surveys.

Individual survey response rates are also interesting compared with other BLS surveys. We see that some surveys have higher response rates than others. To understand why this might be, we’ll want to look at the differences between the surveys. Each survey has specific collection procedures that affect response rates. For example, the high response rate for the Annual Refiling Survey (shown as ARS in the second chart) may catch your eye. When you see that it has a 12-month collection period and is mandatory in 26 states, the rate makes more sense.

We also can see how survey-specific changes have affected a survey’s response rate. For example, we see a drop in the response rate for the Telephone Point of Purchase Survey around 2012. This drop likely resulted from a change in sample design, as the survey moved from a sample of landline telephones to a dual-frame sample with both landlines and cell phones. Because the response rate for this survey continues to decline, we are developing a different approach for collecting the needed data.

What should I know before jumping into the new page?

There’s a lot of information! We’ve tried to make it as user friendly as possible, including a glossary page with definitions of terms and a page to show how each survey calculates their response rates. On the graphs, you can isolate a single survey by hovering over each of the lines. You can also download the data shown in each graph to examine it more closely.

We hope you will find this page helpful for understanding the quality of BLS data. Please let us know how you like it!

Why This Counts: What are the U.S. Import and Export Price Indexes?

Cargo ship in port at nightThe U.S. Bureau of Labor Statistics provides data of all kinds for workers, jobseekers, students, employers, investors, and policymakers. Most BLS measures provide information on U.S. labor markets and living conditions: the national labor force participation rate; the unemployment rate in Illinois; the Consumer Price Index for Anchorage, Alaska. But did you know we also provide international data? With a focus on global trade, we publish the U.S. import and export price indexes.

What are import and export prices indexes?

Import and export price indexes describe changes in the prices for goods and some services exchanged between people and businesses in the United States and trading partners around the world. BLS collects prices of imported and exported products from businesses and calculates price trends monthly.

A brief history of international prices:

  • BLS published the first import and export price indexes in 1973.
  • We published the first all-goods price indexes for imports in 1983 and for exports in 1984.
  • Monthly publication launched in 1989 and expanded in 1994.
  • Import price indexes by country of origin began publication in 1992.

What is an import? An export?

To measure import and export prices, we first need to define “import” and “export.” An import is any product entering the United States from a foreign country; an export goes the opposite direction. A good becomes an import or export when it crosses the border. An imported service is bought by a U.S. resident from a foreign resident, while an exported service is sold by a U.S. resident to a foreign resident.

What is a price index?

A price index measures the average change in prices for a basket of the same products over time. We measure price changes for thousands of imports and exports each month. We publish these price changes for specific products and for the specific industries and U.S trading partners that import or export the products. To learn more about price indexes, see our blog about the Producer Price Indexes.

How do we collect the data?

Like the Consumer Price Index and Producer Price Indexes, the import and export price indexes depend on the cooperation of businesses—in this case, U.S. establishments importing and exporting goods and services. Thousands of public-minded businesses voluntarily provide data through a monthly survey. With all the data we collect, we strive to minimize the burden on our respondents and protect their confidentiality and privacy.

What do import and export prices measure?

If you’ve ever taken an introductory economics course, you know markets determine price changes through supply and demand. On the most basic level, import and export price indexes measure how supply and demand affect prices for goods and services traded internationally. Let’s look at a quick example, the export price index for computers. A U.S. computer manufacturer may look at current trends to figure out short-term sales strategies. Then consider the flip side—the price index for import computers. A U.S. resident shopping for a new computer may want to research whether prices have risen or fallen over the past few months. Or that computer shopper might look at the data from the past few years to see if there is a certain time of year that prices fall. But the importance of import and export prices extends even further than individuals and companies.

  • The indexes are used to account for inflation in other official U.S. statistics like trade balances published by the Census Bureau and the international accounts for U.S. Gross Domestic Product published by the Bureau of Economic Analysis.
  • When economists calculate measures of U.S. industries’ competitiveness compared with our trading partners, they use import and export price indexes.
  • A change in the import price index can tilt domestic inflation in the same direction.
  • When exchange rates between currencies rise and fall, the indexes can show how much of that change is “passed-though” to an import or export price.

Why do import and export price indexes data matter?

The data matter because U.S. consumers depend on imports! Simply put, many of the products sold to consumers in the United States are imported from abroad. And there is a good chance what you buy for your home depends on import prices. But consumers aren’t the only ones who care about these prices. U.S. producers sell abroad and buy from overseas. Producers care about import prices because many imports to the United States go into the goods and services produced domestically. U.S. auto manufacturers care about the prices of auto parts they import from abroad. Producers who export goods to foreign countries benefit from having access to price information. Knowing trends in export agricultural prices, for example, could influence what crops a U.S. grower chooses to produce.

Want to find out more?

Why This Counts: What is the Producer Price Index and How Does It Impact Me?

The Producer Price Index (PPI) – sounds familiar, but what is it exactly? Didn’t it used to be called the Wholesale Price Index? It is related to the Consumer Price Index, but how? How does the PPI impact me?

Lots of questions! In this short primer we will provide brief answers and links for more information. Note, if you are an economist, this blog is NOT for you. It’s an introduction for everyone else!

Video: Introduction to the Producer Price Index

Before we go any further – what is an index? (You said this was a primer!)

An index is like a ruler. It is a way of measuring the change of just about anything. Producer price indexes measure the average change in prices for goods, services, or construction products sold as they leave the producer.

Here is an example of how an index works:

  • Suppose we created an index to track the price of a gallon of gasoline.
  • When we start tracking, gasoline costs $2.00 a gallon.
  • The starting index value is 100.0.
  • When gasoline rises to $2.50, our index goes to 125.0, which reflects a 25-percent increase in the price of gasoline.
  • If gasoline then drops to $2.25, the index goes to 112.5. The $0.25 decline in price reflects a 10-percent decrease in the price of gasoline from when the price was $2.50.

If you are a gasoline dealer, you might find a gasoline index useful. Instead of driving around every day to write down the prices of each competitor’s gasoline and averaging them together, the index can provide the data for you. (Question #5 in the PPI Frequently Asked Questions explains how to interpret an index.)

PPI is called a “family” of indexes. There are more than 10,000 indexes for individual products we release each month in over 500 industries. That is one big family!

OK, so PPI has lots of data – but what kind of data?

PPI produces three main types of price indexes: industry indexes, commodity indexes, and final demand-intermediate demand (FD-ID) indexes.

An industry refers to groups of companies that are related based on their primary business activities, such as the auto industry. The PPI measures the changes in prices received for the industry’s output sold outside the industry.

  • PPI publishes about 535 industry price indexes and another 500 indexes for groupings of industries.
  • By using the North American Industry Classification System (NAICS) index codes, data users can compare PPI industry-based information with other economic programs, including productivity, production, employment, wages, and earnings.

The commodity classification of the PPI organizes products by type of product, regardless of the industry of production. For example, the commodity index for steel wire uses pricing information from the industries for iron and steel mills and for steel wire drawing.

  • PPI publishes more than 3,700 commodity price indexes for goods and about 800 for services.
  • This classification system is unique to the PPI and does not match any other standard coding structure.

We also have more information on the differences between the industry and commodity classification systems.

The FD-ID classification of the PPI organizes groupings of commodities by the type of buyer. For example, the PPI for final demand measures price change in all goods, services, and construction products sold as personal consumption, capital investment, export, or to government. As a second example, the PPI for services for intermediate demand measures price change for services sold to business as inputs to production.

  • PPI publishes more than 300 FD-ID indexes.
  • This FD-ID classification system is unique to the PPI and does not match any other standard coding structure.

Now let’s go back to the beginning

  • 1902: Wholesale Price Index program begins, which makes it one of the oldest continuous set of federal statistics. The Wholesale Price Index captures the prices producers receive for their output. In contrast, the Consumer Price Index captures the prices consumers pay for their purchases.
  • 1978: BLS renames the program as the Producer Price Index to more accurately reflect that prices are collected from producers, rather than wholesalers.
  • PPI also shifts emphasis from a commodity index framework to a stage of processing index framework. This minimized the multiple counting that can occur when the price for a specific commodity and the inputs to produce that commodity are included in the same total index. For example, think of gasoline and crude petroleum both included in an all-commodities index.
  • 1985: PPI starts expanding its coverage of the economy to include services and nonresidential construction. As of January 2018, about 71 percent of services and 31 percent of construction are covered.
  • 2014: PPI introduces the Final Demand-Intermediate Demand system.
  • The “headline” number for PPI is called the PPI for Final Demand. It measures price changes for goods, services, and construction sold for personal consumption, capital investment, government purchases, and exports. We also produce a series of PPIs for Intermediate Demand, which measure price change for business purchases, excluding capital investment.
  • Let me give you an example: Within the PPI category for loan services, we have separate indexes for consumer loans and business loans. The commodity index for consumer loans is included in the final demand index and the commodity index for business loans is mostly in an intermediate demand index.
  • The Frequently Asked Question on the PPI for Final Demand provides even more information on this new way of measuring the PPI. The blog, Understanding What the PPI Measures, may also be helpful.
  • We also have an article that explains how the PPI for final demand compares with other government prices indexes, such as the CPI.

Why is the PPI important?

To me?

  • Inflation is the higher costs of goods and services. Low inflation may be good for the economy as it increases consumer spending while boosting corporate profits and stocks.
  • A change in producer prices may be a leading indicator of consumers paying more or less. Higher producer prices may mean consumers will pay more when they buy, whereas lower producer prices may mean consumers will pay less to retailers. For example, if the PPI gasoline index increases, you may see an increase soon at the pump!

To others (which may impact me!)?

  • Policymakers, such as the Federal Reserve, Congress, and federal agencies regularly watch the PPI when making fiscal and monetary policies, such as setting interest rates for consumers and businesses.
  • Business people use the PPI in deciding price strategies, as they measure price changes in inputs for their goods and services. For example, a company considering a price increase can use PPI data to compare the growth rate of their own prices with those in their industry.
  • Business people adjust purchase and sales contracts worth trillions of dollars by using the PPI family of indexes. These contracts typically specify dollar amounts to be paid at some point in the future. For example, a long-term contract for bread may be escalated for changes in wheat prices by applying the percent change in the PPI for wheat to the contracted price for bread.

Video: How the Producer Price Index is Used for Contract Adjustment

PPI is a voluntary survey completed by thousands of businesses nationwide every month. BLS carefully constructs survey samples to keep the number of contacts to a minimum, making every business, large and small, critical to the accuracy of the data. We thank you, our faithful respondents! Without you, BLS could not produce gold-standard PPI data.

Finally, check out the most recent monthly PPI release to get all the latest numbers. Head to the PPI Frequently Asked Questions to learn more. Or contact the PPI information folks at (202) 691-7705 or ppi-info@bls.gov.

Want to learn more about BLS price programs? See these blogs: