Handbook of Methods International Price Program Presentation
International Price Program: Presentation
The Bureau of Labor Statistics (BLS) publishes hundreds of import and export price indexes every month. These include price indexes for aggregate merchandise goods, air freight and air passenger services, merchandise goods imports by locality of origin, merchandise goods exports by locality of destination, and U.S. terms of trade indexes by locality. Indexes are published by industry (North American Industry Classification System), by commodity area (harmonized system), and by U.S. Bureau of Economic Analysis (BEA) end use (end-use classification). In addition to regular index releases, publications include analysis articles and the data are used in scholarly studies and in the production of gross domestic product (GDP) and other official statistics.
Publications
The primary U.S. Import and Export Price Index (MPX) publication is the monthly news release, which contains summary text, data tables, and a technical note. The summary text describes price movements and trends. The tables provide index values, relative importance values, monthly percent changes, and annual percent changes for corresponding price indexes. Lastly, the technical note at the end of the news release describes the classification systems and the methods used to calculate the U.S. Import and Export Price Indexes, the guidelines for price data collection, data revision policy, and uses of the data. In addition to the release, interactive charts are available that cover major import categories, major export categories, select import localities, export grains, and air passenger fares. Links to the LABSTAT database, which is a database that contains the complete set of available data, can be found on the home page as well.
Other publications produced by the International Price Program (IPP) analyze specific indexes and aspects of the U.S. economy. Some of these publications review how the U.S. Import and Export Price Indexes relate to particular industries, regional areas, and uses, while others provide a comprehensive background and study regarding an area of interest. Industry pamphlets review the performance of a particular industry’s corresponding U.S. Import and Export Price Indexes, which factors played a role in the index movement, and which states were involved in that industry. Regional pamphlets observe the movements of specific export indexes related to a state’s or U.S. region’s main exporting industries. The contract escalation pamphlet takes a detailed look at how U.S. Import and Export Price Indexes can be used for that purpose.The Variance Estimates for Price Changes in the Import and Export Price Indexes provide variance statistics for select indexes. Information and tables are available on the comparability of import prices to their PPI counterparts. Monthly Labor Review (MLR) and Beyond the Numbers articles examine more comprehensive economic issues. These articles could include a historical piece involving a highly traded commodity, or an in-depth study about how international prices compared with other economic indicators. In addition, several external academic papers used U.S. Import and Export Price Indexes data for exchange rate studies, as well as industry-specific studies of imports or exports. Information is also available for import and export survey respondents who provide the data to BLS that are used to calculate indexes.
All publications, as well as links to academic papers that reference import and export pricing data, can be found on the MXP home page. Users may also subscribe to receive a monthly email that is sent whenever the U.S. Import and Export Price Indexes are updated by clicking the following link “BLS News Service Subscription Page” or by clicking the box labeled Contact MXP at the top of the MXP home page and scrolling to the bottom of the web page.
Publication guidelines for the U.S. Import and Export Price Indexes
Survey data for the import and export price indexes are collected under a strict pledge of confidentiality that the data will be used solely for statistical purposes and not be disclosed or published in a way that could expose unique data observations or respondent information. In addition, all price indexes are evaluated using quality guideline statistics to assure that each published price index is representative of the sample of a product area or industry. The publication guidelines ensure data confidentiality and representative.
The import and export price indexes are evaluated annually to determine whether they meet publication guidelines. As a result, the number of price indexes that are published varies from year to year. Publication changes are implemented annually with the release of the January price indexes. On rare occasions, a published price index may not meet publication guidelines outside the annual publication review annual evaluation and would be removed from publication at that time. Price indexes might also be suppressed for a month or number of months in exceptional circumstances. The following guidelines are used to evaluate the publication status of indexes:
1. Minimum dollar value: A price index maintains representativeness of the sampled product or industry, so a minimum dollar value of trade is established to approximate that representativeness. Some exceptions are made for published BEA end-use indexes that fall below the minimum dollar value yet remain statistically robust because of their importance in deflating the net exports component of GDP.
2. Minimum number of items: A price index maintains a minimum number of items to protect confidentiality.
3. Minimum number of establishments: A price index maintains a minimum number of establishments to protect confidentiality.
4. Maximum weight for an individual establishment: A price index does not depend on one establishment for the prices underpinning the index to protect confidentiality. Thus, no establishment used to calculate any index can exceed a maximum share of trade weight.
5. Minimum coverage: Each price index maintains a minimum average coverage level during the evaluation period to assure the quality of the index values. The coverage level is defined as the ratio of items sampled and fielded for an index that contains a usable price for a given month.
Uses for the U.S. Import and Export Price Indexes
The U.S. Import and Export Price Indexes have many uses and users. What follows are some illustrative examples of the uses of these statistics.
Adjusting foreign trade statistics
Data from the U.S. Import and Export Price Indexes are used to adjust U.S. government foreign trade statistics for price level changes. Produced by the BEA, the National Income and Product Accounts (NIPA) contain a net export component that is real exports minus real imports. Following are the basic formulas for deriving GDP and real imports:
where
C = real consumption,
I = real investment,
G = real government spending,
X = real exports, and
M = real imports.
Import and export price index data are used by the BEA to revise the nominal import and nominal export values in order to obtain their real values:
where
M = real imports,
m = nominal imports, and
p = the price index for imports.
Depending on the movement of the indexes, an import’s nominal value could be more or less than its real value. The same is true for exports. NIPA are not the only government statistics produced using import and export price data to deflate certain components. The U.S. Census Bureau uses import and export price indexes to deflate its monthly foreign trade statistics. In general, the U.S. Import and Export Price Indexes can be used to deflate any type of import or export volume statistic into real terms. For example, a company that exports raw cotton might keep a measure of its sales in current dollar terms. In order to report the real value of sales to stockholders, the company needs a method to convert sales values into constant dollars. The company would be able to make this conversion by deflating sales statistics using the export price index for raw cotton. Any of the U.S. Import and Export Price Indexes can be used for deflation purposes, provided the data being deflated use a similar definition for an import or an export as is used for the U.S. Import and Export Price Indexes.
Contract adjustment
Other ways to use the U.S. Import and Export Price Indexes data include contract adjustment and trade agreement negotiation. Many economic transactions are formalized with contracts. Sometimes a business or government agency needs to ensure that the payment for some output or input is equal in real terms to what was desired when the contract was signed. A specific import or export price index can be used to equate a dollar amount in the future with a specific dollar amount at the time of signing. Government agencies that have used the data in negotiating trade contracts include the Department of State, the Department of Commerce, and the office of the U.S. Trade Representative.
Examining currency exchange rate effects
Exchange rates play a vital role in the pricing of imports and exports. Data users can use U.S. Import and Export Price Indexes in a number of ways to analyze the effects that exchange rates have on the economy. The first method is to construct an import or export price index expressed in foreign currency terms. To do this, users can take country of origin or destination weights in an item area, obtained through the Census Bureau, and then calculate a geometric average of the exchange rates between the respective currencies and the U.S. dollar. Users can derive foreign currency indexes by multiplying the average exchange rate indexes by the corresponding U.S. dollar import or export price index. Another method is to examine pass-through rates by comparing the U.S. dollar’s movements against other currencies and the movements of the U.S. Import and Export Price Indexes. For example, if the U.S. dollar appreciates against foreign currencies, the price of U.S. exports (in foreign currency) should rise, while the price of U.S. imports would be expected to fall.
Price elasticity
The U.S. Import and Export Price Indexes are also a valuable input to price and income elasticity studies. Import and export price elasticities are the percentage changes in the volume of trade resulting from percentage changes in trade prices relative to domestic prices. Income elasticities measure how levels of imports and exports are affected by changes in the real value of national income, measured by the growth in GDP. They are calculated by dividing the percentage change in either the volume of imports or exports by the percentage change in GDP over the same period.
Forecasting future prices and formulating monetary and fiscal policy are common uses of U.S. Import and Export Price Indexes data. Often, movement in import prices can be an indicator of future inflation because many inputs to domestic production are imported. Import and export prices affect the general level of inflation in the United States, considering import and export products compete, through pricing, with the domestic market. Whether attempting to gauge future inflation or analyze some other aspect of international trade, those who formulate monetary and fiscal policy also consider import and export prices when determining a course of action. The Federal Reserve Board of Governors looks at import and export prices as one of the economic indicators in the myriad of data used in their decision making.
There are many other ways U.S. Import and Export Price Index data are used in studies and decision making. Researchers wanting access to nonpublic import- and export-price-related microdata must submit an application following the criteria posted on the BLS visiting researchers’ web page. Once approved, researchers may access the data for 1 to 2 years onsite at the BLS national office in Washington, D.C.
Revision policy
The U.S. Import and Export Price Indexes are revised for each of the 3 months following the initial publication of the data in order to reflect late-reported prices and correction by respondents. After the 3-month revision period, no further revisions take place. For example, data published with the January release will be subject to revision in the February, March, and April releases.
Data correction
If an error is discovered in any published data product for the U.S. Import and Export Price Indexes, the publication is corrected and republished as soon as possible. In the event that any error cannot be corrected prior to the next data release, the erroneous data will be suppressed. Any corrections or suppressions are clearly noted on the publication as well as on the public web page. In addition, a record of the error is added to the BLS errata page.
Last Modified Date: August 01, 2024
United States Department of Labor
