Thursday, May 19, 2011

4 of Our Top 5 Imports Have Fallen in Price

The chart above shows the top five imports and exports at the Port of Los Angeles for 2010, based on the number of loaded containers.  This Business Insider story points out that the top five U.S. exports are raw materials, while the top five imports are finished goods. 

Something else about the top five imports that might be interesting is to compare the changes in the price indexes for those items over the last ten years (April 2001 to April 2010) to the overall change in the CPI during that period:

CPI: All Items        +27.5%

CPI: Furniture:     -11.6%
CPI: Toys:                -43.3%
CPI: Apparel:           -7.2%
CPI: Footwear:         3.3%
CPI: Auto parts:      +35.9%

Bottom Line: The real prices of furniture, toys, apparel and footwear have all fallen substantially over the last ten years, by double-digit percent declines, and the real price of auto parts has increased.  Furniture, toys, apparel and footwear all require very labor-intensive production processes, and by purchasing these products from Mexico, China, Vietnam and India where labor costs are low, American consumers have probably saved many millions, if not billions of dollars.  

It's probably not a coincidence that the top imports coming through the L.A. Port are some of the products that have fallen the most significantly in real price over the last decade, to the great benefit of America's consumers.  Remember that countries don't trade with each other at the national level, people trade; and t's American consumers who are shopping globally for the best price and value.  For furniture, clothing, footwear, and toys, cost-conscious American consumers are wisely taking advantage of the falling real prices for those items that are imported from overseas, and that bargain-hunting consumer behavior ("consumer greed") is being reflected in the import volumes at the L.A. Port.  

27 Comments:

At 5/19/2011 10:32 PM, Blogger bix1951 said...

It used to be that exporters of raw materials were poor countries.
Somehow the tables have been turned.

 
At 5/19/2011 10:57 PM, Blogger Benjamin said...

This is yet another reason why the Fed can print money to the moon. America sucks up huge gobs of goods, labor, services and capital when our economy grows. All of those inputs put the damper on inflation.

Our economy grew well all through the 1980s, 1990s, and 2000s, defying expectations of inflation.

Inflation is about a serious as Billy Barty trying out for the Celtics.

 
At 5/20/2011 5:49 AM, Blogger geoih said...

Quote from Benjamin: "This is yet another reason why the Fed can print money to the moon."

Wow, just like clockwork, the local inflationist begins preaching about the devine effects of creating something out of nothing. It's a bit like watching a turkey strut proudly around the farm yard in the third week of November.

Now tell us how much value the dollar has lost "through the 1980s, 1990s, and 2000s ..."? (You can Google it.)

 
At 5/20/2011 7:52 AM, Blogger Hydra said...

Remember this chart next time you holler about AG subsidie"s.

 
At 5/20/2011 7:56 AM, Blogger Hydra said...

It takes lots of space to grow animal feed. For those countries with high population on small territory, buying animal feed makes sense.

 
At 5/20/2011 7:56 AM, Blogger Jason said...

Proof we've exported inflation?

 
At 5/20/2011 7:58 AM, Blogger Hydra said...

Lost compared to what? Gold or computer memory?

 
At 5/20/2011 8:52 AM, Blogger morganovich said...

you are just cherry picking mark.

import prices were up 11.1% from a year ago in the last BLS report.

http://www.bls.gov/news.release/ximpim.nr0.htm

sure, this is driven mostly by fuel, but not counting a highly inelastic commodity as inflation seems awfully suspect.

even non fuel imports were up 4.3% from a year ago, well in excess of CPI.

more worrying, they have been up 0.5-0.7% each month this year, meaning those prices are up over 2.5% year to date which annualizes to 7.8%.

there is really no compelling evidence at all that we a are not seeing a huge uptick in import prices so far this year, nor does it show any sign of abating.

you can pick a few cherries, but given your apparent trust of BLS data, i don't see how you can ignore the aggregate.

further, i don't see how 4 of our top 5 imports can have fallen in price while overall imports are up over 11%. sorry, but that just does not square.

i think that data is pretty suspect.

our top import is fuel. even if we take that out, we have 4.3% inflation year on year. ho could you possibly get to that number with the top 4 remaining imports all dropping in price?

either the data is bad, or those are extremely non representative imports and the rest of the basket is inflating wildly.

 
At 5/20/2011 9:19 AM, Blogger Michael Hoff said...

Car parts are way up. Wonder if that's all due to demand, that people are holding on to cars longer and thus need more parts.

I'll go ask my 1997 Jimmy what it thinks.

As for the items being imported and exported, bix1951 is right. It looks like reverse imperialism.

 
At 5/20/2011 10:03 AM, Blogger Buddy R Pacifico said...

Cotton is the #2 export through LA ports. Cotton is also the #2 subsidised crop. What has happened to worldwide cotton prices for the last twelve months? Up 146%.

The U.S. seems to be a go-to market for cotton. Gee, let's party like it's 1860, thanks to support from U.S. taxpayers. Texas is the biggest recipient of assistance for cotton farmers.

 
At 5/20/2011 10:05 AM, Blogger James said...

Two things are causing this. Inflation in the goods we have to buy leaves less money for the goods we want to buy reducing demand for those goods and pushing the price down. Second companies that were the first to outsource are more and more competing with other companies which have also outsourced rather than domestic production. That leads to price competition.

Looks to me like this economy is ready to roll over and decline somewhat. Bix1951 is correct. We are not in a good position. I reiterate my basic position which I admit has looked bad in recent months: no tariffs no recovery! I, of course, mean a real recovery with more Americans working, both percentage and absolute numbers, than when we went into this decline. And the economy was anemic before this hit.

 
At 5/20/2011 10:06 AM, Blogger morganovich said...

Lost compared to what? Gold or computer memory?

how about compared to say, the price of a house or a car?

remember what houses cost in 1970? median price was $23,700. a $100k house was a mansion.

or rent?

or the price of a movie?

or how about gasoline? remember 99c gas?

 
At 5/20/2011 3:59 PM, Blogger Jet Beagle said...

bix1951 said: "It used to be that exporters of raw materials were poor countries.Somehow the tables have been turned."

I'm pretty certain that the tables have not turned.

The data Mark provided shows the greatest number of containers by product shipped out of one U.S. port. A couple of important points:

1. Number of containers is not at all an indication of value. Raw materials physically take up more space than do high value technology goods.

2. Some very important U.S. exports are not containerized when exported.

Here's a much better indication of the type goods exported by the U.S.:

Top U.S. exports to the world
2009 $billions)

civilian aircraft . $74.7

pharmaceuticals ... $46.1

semiconductors .... $37.5

automotive parts... $30.4

telecom equip ..... $28.7

Source: U.S. Census Bureau

When you look at exports by value rather than by physical dimensions, you get a very different picture.

 
At 5/20/2011 6:46 PM, Blogger James said...

When you look at exports by value rather than by physical dimensions, you get a very different picture.

Not True. We have a trade deficit

 
At 5/20/2011 8:54 PM, Blogger VangelV said...

This is yet another reason why the Fed can print money to the moon. America sucks up huge gobs of goods, labor, services and capital when our economy grows. All of those inputs put the damper on inflation.

Not quite. While the falling price of toys may be good for some consumers and the above material is good news, it is not reflective of the real experience of the average individual. On that front, I give you a link to the article, Seniors Have Lost 32 Percent of Their Buying Power Since 2000.

 
At 5/21/2011 2:23 AM, Blogger Ron H. said...

"Second companies that were the first to outsource are more and more competing with other companies which have also outsourced rather than domestic production. That leads to price competition."

Price competition is a good thing, right?

 
At 5/21/2011 4:19 AM, Blogger Jet Beagle said...

James: "We have a trade deficit"

So what? We've had a trade deficit for decades, and yet the U.S. economy has grown larger than ever before. Why do you care that the U.S. has a trade deficit?

 
At 5/21/2011 9:36 AM, Blogger James said...

Why do you care that the U.S. has a trade deficit?

Because we are financing it with debt.

Price competition is a good thing, right?

Not when it impoverishes our citizens and weakens the nation.

 
At 5/21/2011 6:22 PM, Blogger Ron H. said...

"Not when it impoverishes our citizens and weakens the nation."

How can lower prices make us poorer?

 
At 5/22/2011 10:36 AM, Blogger James said...

How can lower prices make us poorer?

When the same thing (free trade) that causes lower prices also drives wages down by an amount greater than lower prices. With constant wage, lower prices should cause real (inflation adjusted) wages to go up. If real wages go down, even with lower prices, then the lower prices are not low enough to keep up with lost wages and we are poorer. Real wages are declining as you can see here

 
At 5/23/2011 1:25 PM, Blogger Ron H. said...

"Real wages are declining as you can see here"

That's just production workers. What about the other 80% of the work force?

Your reference doesn't indicate whether the dollar amounts are for total compensation, or just cash wages.

Are you sure that free trade is the only possible cause of the trend you see?

We know that productivity - that is, more capital per worker - has increased dramatically over the years, making each worker more valuable. That chart almost seems to indicate the opposite. It's hard to believe that production has become more labor intensive.

 
At 5/23/2011 5:12 PM, Blogger James said...

That's just production workers. What about the other 80% of the work force?

No, that is not just production workers. It is earnings (wages) of production AND nonsupervisory workers on private non-farm payrolls. This excludes executives, managers, and professionals like doctors, and lawyers. It is 80 percent of all workers in the US. Yes 80 percent of the workforce had higher real wages in the past. Hard to believe is it not? Where is the economy free traders promised?

Are you sure that free trade is the only possible cause of the trend you see?

Yes, free trade is the primary cause. For all the explanations other than productivity see page 11 “Traditional Explanations” of Dr. Ravi Batra’s ”The Myth of Free Trade – the Pooring of America.” He gives 10 commonly used explanitions and explains why the do not work. The short versions is that they are either things that result from a wage decline or are not unique in our economic history whereas free trade is unique. You can read this part of the book by going to Amazon.com, finding the book, and clicking on the search inside this book link.

Productivity. To avoid admiting that free trader has anything to do with our economic problems free traders follow that old adage “a lie is as good as the truth if you can get someone to believe it.” Thus as one prevarication is shot down in flames another aries out of the ashes like a Phoenix. Productive is the latest explanation to arise out of the free trade spin machine. It too will go down in flames. Batra’s book is from 1992 and does not address this new told lie because it had not been used then.

If productivity is the real cupprit in our employment decline then why now and not 200 years ago? Productivity improvement has been going on since George Washington started buying gunpowder to fight the British. Productivity improvement is the halmark of our nation. It has never before produced high unemployment. Moreover, today’s productivity improvements are not nearly as dramatic as they were a 100 years ago. Also those made jobless by productivity had other jobs to go to that today are in China. Free trade is our problem not our solution.

 
At 5/23/2011 10:49 PM, Blogger VangelV said...

Where is the economy free traders promised?

Free trade has allowed people to offset the decline of purchasing power due to the Fed's money printing and the government's debt financed spending. There is no question that trade offers a benefit to a country. But that benefit cannot save an economy that is based on borrowing and consumption.

 
At 5/23/2011 11:33 PM, Blogger Ron H. said...

"No, that is not just production workers. It is earnings (wages) of production AND nonsupervisory workers on private non-farm payrolls."

But, does this include any other earnings such as benefits other than cash wages, or is that only the amounts production workers see in their paychecks?

"This excludes executives, managers, and professionals like doctors, and lawyers. It is 80 percent of all workers in the US. Yes 80 percent of the workforce had higher real wages in the past."

What about the other 80% of the workforce in the service sector? I don't believe your chart includes them. This might include airline pilots, engineers, accountants, insurance agents, teachers, bankers, legal services, healthcare workers, financial services, etc. etc.

Perhaps I wasn't clear whan I mentioned productivity. We know, as you say, that productivity has been with us all along, and that:

""Productivity improvement is the halmark of our nation. It has never before produced high unemployment."

I wasn't blaming productivity gains for lower wages, but just the opposite. Since productivity gains always increase real wages, Your chart showing declining wages would almost point to a DECLINE in productivity, and a return to more labor intensive production. This doesn't seem possible.

 
At 5/24/2011 12:37 AM, Blogger James said...

What about the other 80% of the workforce in the service sector? I don't believe your chart includes them.

Yes, it is all sectors except farm workers including service sector workers. Those not covered are about 20 percent of all workers such as executives, managers, and professionals. It does include airline pilots, engineers, accountants, insurance agents, teachers, bankers, legal services, healthcare workers, financial services who do not have management positions.

But, does this include any other earnings such as benefits other than cash wages

No, it is the pay check. Other payments have declined also. Note that many companies, IBM for example, have eliminated their defined benefit pension plans in favor of a defined contribution plan that is not as good. In the 1970s companies picked a larger part of the cost of health insurance. I know of no hard data available for that.

 
At 5/24/2011 2:21 AM, Blogger Ron H. said...

"Yes, it is all sectors except farm workers including service sector workers."

Do you have a BLS reference for this? I can't find anything similar. And/or do you have anything more recent?

 
At 5/24/2011 4:16 PM, Blogger James said...

Do you have a BLS reference for this? And/or do you have anything more recent?

See footnote 1 BLS Table B-6

Data relate to production employees in mining and logging and manufacturing, construction employees in construction, and nonsupervisory employees in the service-providing industries. These groups account for approximately four-fifths of the total employment on private nonfarm payrolls.

I do not have more recent data. The same data are in Ravi Batra’s book so I trust it. Remember our government is firmly in favor of free trade and as such they make it hard to find hard numbers that argue against free trade and this certainly does. Another piece of data I can not find from the government is how many foreign workers are in this country on H-1B and L-1 temporary visas. The most common estimate is 500,000 H-1Bs but it is only an estimate.

 

Post a Comment

Links to this post:

Create a Link

<< Home