Wednesday, July 14, 2004

Considering new and used vehicle prices in the US have been in a minor freefall since January 2002, the news that motor vehicle sales tanked 4.3% in June can't be good. More deflation on the auto front.

The BLS reports today that import deflation made a special guest appearance last month, too. Prices on all imports fell 0.2% in June; no change on non-petroleum imports. This was the lowest import inflation level since October 2003.

Even more interesting was the big price fall in US exports. Non-ag export prices fell 0.1%, the first whiff of export price deflation since September 2003. Agricultural export prices, however, fell through the floor in June: -4.6% in a single month! The Commodity Research Bureau's foodstuffs price index is changed -7.5% since April; grains are changed -18% over the same two months. This may be a very rude ending to the ag commodity inflation running rampant since last fall -- thus also eliminating one of the few spots of goods inflation in the CPI.

The world of farming has become one of brief booms and long busts. I guess nine months of living la vida loca was enough. Our brief flirtation with general inflation may very well be over, too.

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