Topic Archives: Inflation and Prices

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:

 

Reaching out to Stakeholders—and Steakholders—in Philadelphia

The U.S. Bureau of Labor Statistics has staff around the country who serve several critical roles:

  • Contacting employers and households to collect the vital economic information published by BLS
  • Working with partners in the states who also collect and review economic data
  • Analyzing and publishing regional, state, and local data and providing information to a wide variety of stakeholders

To expand the network of local stakeholders who are familiar with and use BLS data to help make good decisions, the BLS regional offices sponsor periodic Data User Conferences. The BLS office in Philadelphia recently held such an event, hosted by the Federal Reserve Bank of Philadelphia.

These Data User Conferences typically bring together experts from several broad topic areas. In Philadelphia, participants heard about trends in productivity measures; a mash-up of information on a single occupation—truck drivers—that shows the range of data available (pay and benefits, occupational requirements, and workplace safety); and an analysis of declines in labor force participation.

Typically, these events provide a mix of national and local data and try to include some timely local information. The Philadelphia conference included references to the recent Super Bowl victory by the Philadelphia Eagles and showed how to use the Consumer Price Index inflation calculator to compare buying power between 1960 (the last time the Eagles won the NFL Championship) and today.

We also tried to develop a cheesesteak index, a Philadelphia staple. Using data from the February 2018 Consumer Price Index, we can find the change in the price of cheesesteak ingredients over the past year.

Ingredient Change in Consumer Price Index, February 2017 to February 2018
White bread 2.5 percent decrease
Beef and veal 2.1 percent increase
Fresh vegetables 2.1 percent increase
Cheese and related products 0.8 percent decrease

Image of a Philadelphia cheesesteak

These data are for the nation as a whole and are available monthly. Consumer price data are also available for many metropolitan areas, including Philadelphia. These local data are typically available every other month and do not provide as much detail as the national data.

While the Data User Conferences focus on providing information, we also remind attendees the information is only available thanks to the voluntary cooperation of employers and households. The people who attend the conferences can help us produce gold standard data by cooperating with our data-collection efforts. In return we remind them we always have “live” economists available in their local BLS information office to answer questions by phone or email or help them find data quickly.

Although yet another Nor’easter storm was approaching, the recent Philadelphia Data User Conference included an enthusiastic audience who asked good questions and left with a greater understanding of BLS statistics. The next stop on the Data User Conference tour is Atlanta, later this year. Keep an eye on the BLS Southeast Regional Office webpage for more information.

Up and Down the Turnpike: The Power of State Estimates of Consumer Spending

You may know New Jersey for its Turnpike, its Parkway, and ribbons of highways crisscrossing the state, but new information shows that New Jersey households have fewer vehicles than the U.S. average. New Jersey households have an average of 1.4 vehicles, compared with an average of 1.8 vehicles nationwide.

This is just one of the tidbits we can glean from experimental state weights in the Consumer Expenditure Survey just released for New Jersey. Producing state estimates is part of our continuing plan to expand the use of data on consumer spending. The first available state weights are for New Jersey. We hope to release weights for more states in the coming months.

The survey is a nationwide household survey designed to find out how U.S. consumers spend their money. It is the only federal government survey that provides information on the full range of consumer spending, incomes, and demographic characteristics. One way BLS uses the consumer spending data is to create the market basket of goods and services tracked in the Consumer Price Index. Besides the spending information, the survey also collects the demographic characteristics of survey respondents. The new state weights allow us to examine what the typical New Jersey household looks like.

New Jersey looks similar to the United States as a whole, and even more similar to the New York metro area, which encompasses much of the northern part of New Jersey. One notable difference between New Jersey and other areas is the number of vehicles. Transportation in the Consumer Expenditure Survey includes vehicle purchases and gasoline and other car-related expenses. We would expect to see lower transportation spending in New Jersey compared with the nation because of fewer vehicles present in the state and other reasons.

A chart showing income and consumer spending levels in 2016 in New Jersey, the New York metro area, and the United States.

Editor’s note: Data for this chart are available in the table below.

Now that we can produce statistically valid state estimates from the survey, we can answer all kinds of interesting questions. Many researchers look at different spending categories to examine public policies and to evaluate how certain decisions affect consumer behavior. Because we can now use the survey data to make estimates for certain states, researchers can explore these kinds of questions with more geographic detail. The chart below shows how New Jersey compares with the New York metro area and the nation in five of the broadest spending categories.

Average annual consumer spending in 2016 for selected categories in New Jersey, the New York metro area, and the United States.

Editor’s note: Data for this chart are available in the table below.

Policymakers, researchers, and other data users have often asked for data about spending habits and income for states. Many times, household surveys just do not have enough sample to provide reliable estimates for all possible user needs. With our continuing improvements to the Consumer Expenditure Survey, we are learning which states provide enough responses for us to produce statistically valid state estimates. Once we create these weights for the states that can support them, data users will be able to explore a wider range of questions about consumer spending.

You can learn more from BLS economist Taylor Wilson’s article, “Consumer spending by state: BLS puts New Jersey to the test.”

Average annual income and selected expenditures, 2016
Measure New Jersey New York
Metropolitan
Statistical Area
United States
Income $89,927 $87,212 $74,069
Total expenditures 63,100 65,764 54,157
Transportation expenditures 7,295 6,828 8,755
Average consumer spending in selected categories, 2016
Geography Housing Food Transportation Healthcare Entertainment
New Jersey $23,617 $8,641 $7,295 $5,239 $2,097
New York Metropolitan Statistical Area 24,308 9,190 6,828 4,260 2,277
United States 17,774 7,203 8,755 4,373 2,497

BLS Celebrates Read Across America Day

BLS celebrates the National Education Association’s Read Across America Day on March 2. Not by coincidence, it is also the birthday of the well-known author Dr. Seuss.

In the words of the famous author, “The more that you read, the more things you will know. The more that you learn, the more places you’ll go.”

BLS data show that reading is every bit as important as Dr. Seuss claimed. Only 2.5 percent of workers do not need to read or write on their job, according the Occupational Requirements Survey. However, the American Time Use Survey finds that only about 20 percent of people read for personal interest on an average day.

In honor of Dr. Seuss and Read Across America Day, how about taking some time to learn what else BLS data tell us about reading?

“Fill your house with stacks of books, in all the crannies and all the nooks.” –Dr. Seuss

Consumers spent $15,268,000,000 on reading in 2016, according to the Consumer Expenditure Surveys. On average, households (technically referred to as consumer units) spent $118 on reading. So, of the Whos down in Whoville, which Whos are reading?

  • Households in the West region spent an average of $171 on reading. Those in the Midwest averaged $121, while households in the Northeast and South regions averaged just under $100.
  • Married couples without children spent an average of $174 on reading for their household; those with children spent $123. The households of single parents with children under 18 spent an average of $41.
  • Generationally, when the reference person was a baby boomer (born between 1946 and 1964), the household spent an average of $130 on reading. That compares with an average of $64 spent by households of millennials (those born in 1981 or later).

The Consumer Price Index gives us information about changes in the prices of the goods and services we buy. For example, prices for eggs (white or brown, but not green) increased 11.6 percent in 2017, and prices for ham were up 2.7 percent.

  • Prices for recreational books decreased 3.2 percent in 2017 and were 7.7 percent lower than in 2007.
  • Costs for newspapers and magazines declined 1.1 percent in 2017, but were 37.5 percent higher than a decade ago.
  • Prices for educational books and supplies decreased 1.8 percent in 2017, but were 58.3 percent higher than in 2007.

“I can read in red. I can read in blue. I can read in pickle color too.” –Dr. Seuss

According to the American Time Use Survey, the share of women who spent time reading for personal interest was larger than the share of men. In addition, women were slightly more likely than men to spend time reading to and with children in the household (excluding education- and health-related reading).

  • Seventeen percent of men and 21.8 percent of women spent time reading for personal interest on an average day. On the days they read, men and women spent an average of around an hour and a half participating in this activity.
  • On an average day, 13.4 percent of fathers and 18.5 percent of mothers spent time reading to and with their young children. On days they engaged in this activity, it accounted for about a half an hour of time for both fathers and mothers.

“You’re never too old, too wacky, too wild, to pick up a book and read to a child.” –Dr. Seuss

Do you want to spend more time with Thing 1 and Thing 2? How about a fox in socks or a cat in a hat? Library workers get to do all of that!

Librarians, library technicians and clerical library assistants spend all day with books. Librarians earn the highest wages of the three and also require higher levels of education and work experience, according to the Occupational Employment Statistics and the Occupational Requirements Surveys.

  • Nearly 50 percent of librarian jobs required a bachelor’s degree, and another 42 percent required a master’s degree in 2017. High school diplomas were more common for library techs (42 percent) and clerical library assistants (80 percent).
  • The average annual wage for librarians in 2016 was $59,870. Library technicians averaged $34,780 and clerical library assistants, $27,450.
  • Lifting books is a big job. On a scale from sedentary to very heavy, a medium level of strength was required for about 57 percent of librarian jobs and 71 percent of clerical library assistant jobs.

“There’s no limit to how much you’ll know, depending how far beyond zebra you go.” –Dr. Seuss

So, how will you celebrate Read Across America Day—in a boat, with a goat, in the rain, on a train, in a box, with a fox, in a house, with a mouse? Don’t forget the green eggs and ham! And remember, “You can find magic wherever you look, sit back and relax, all you need is a book.” –Dr. Seuss