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Although import price indexes were not established in 1889, efforts were made to compare prices with selected countries over the years, and by 1973, the International Price Program (IPP) published the first annual report on U.S. Import and Export Price Indexes.
In 1961, a report on federal price statistics was prepared by the National Bureau of Economic Research (NBER) for Congress' Joint Economic Committee. The report suggested that responsibility for compiling import and export price indexes be assigned to a federal statistical agency “to obtain the attention and resources for these indexes that we believe are essential.” Until the IPP was established at the Bureau of Labor Statistics (BLS), the only measure of price trends in U.S. trade was the unit-value indexes produced by the Census Bureau, which did not provide the precision needed. The unit value indexes were calculated at fairly broad levels meaning some items included in calculation were heterogeneous. Unit-value bias arises when there is no way to determine if changes to the indexes are the result of true price changes or changes to the mix of items. In addition, unit-value indexes do not take into account quality changes which also distort the measure of true price change. An additional study undertaken for NBER, by professors Irving Kravis and Robert Lipsey, gave more impetus to the project. In the study, "Price Competitiveness in World Trade," Kravis and Lipsey outlined the need for such measures and the feasibility of producing them. During this time, the BLS Division of Price and Index Number Research, because of its expertise in developing other price measures, had also begun research on the feasibility of producing import and export price indexes. IPP, a natural result of this research, was established in 1971.
The newly created IPP first produced annual U.S. Import and Export Price Indexes in 1973. As a response to changing international economic conditions and the need for both the federal government and the private sector to obtain these data on a timelier basis, the program began quarterly collection of price data and publication of U.S. Import and Export Price Indexes in 1974. This also allowed the indexes to be used in deflation of the quarterly gross domestic product estimates produced by the Bureau of Economic Analysis. Commodity area coverage and index detail increased as more samples were initiated. This expansion attempted to meet the needs of users while moving toward the goal of producing indexes that covered all merchandise goods. In early 1983, the first general index for all imports was published for the quarter ended December 1982. An index for all exports was published in early 1984 for the December 1983 quarter.
The earliest import and export price samples were based on a subjective selection of establishments and items whose price movements were considered representative. A multi-stage design was used to select up-to-date specific import and export items that could be priced over time. IPP initiated a probability sampling technique for the first two stages in 1976 and for the subsequent stages in 1982. To maximize productivity, efforts were made to ensure that frequent importers and exporters make up approximately 99 percent of each sample.
In 1982, once full coverage of import and export merchandise goods categories was available, the Office of Management and Budget (OMB) placed the U.S. Import and Export Price Indexes on the existing list of principal federal economic indicators (PFEI) joining the Consumer Price Index and Producer Price Index.
The U.S. Import and Export Price Indexes continued to expand with the publication of selected import and export services price indexes beginning with the first quarter of 1986 (export air passenger fares). Since then, price indexes have been added for additional import and export services, but due to budget cuts in 2007, price indexes for import oil tanker freight, import ocean liner freight, export post-secondary education, and export travel and tourism were discontinued.
In 1989, the import and export merchandise goods universes used in the calculation of the indexes were divided into halves. Samples for one import half and one export half are fielded each year, so that both universes are fully resampled every 2 years. Sampled items are priced for approximately 5 years until they are replaced by a fresh sample of the same half-universe. Generally, each index is composed of at least two samples for each half of the import and export merchandise goods universes.
Also in 1989, the publication of a limited number of indexes on a monthly basis was initiated. This was done primarily to permit the Census Bureau to publish monthly merchandise goods trade statistics on an inflation-adjusted basis. By January 1993, most of the merchandise goods indexes were being published on a monthly basis.
With the release of March 1992 data, import locality of origin indexes were first published. In 2005, locality of origin monthly publications were expanded, adding six more countries and regions. The locality of origin indexes expanded again in 2012, when additional industries were included for select countries and regions.
Most recently, in 2018, export locality of destination indexes and U.S. terms of trade indexes by locality were published for the first time. The indexes were retroactively published back to December 2017. In addition, tables comparing import price indexes with their respective PPI counterparts were introduced.
1 Dorothy S. Brady, Edward F. Denison, Irving B. Kravis, Philip J. McCarthy, Albert Rees, Richard Ruggles, Boris C. Swerling, George J. Stigler, The Price Statistics of the Federal Government: Review, Appraisal, and Recommendations, National Bureau of Economic Research, 1961, https://babel.hathitrust.org/cgi/pt?id=mdp.39015048453024&view=1up&seq=80.