Frequently Asked Questions (FAQ's)

What are the U.S. Import and U.S. Export price indexes?

Answer: The U.S. Import and U.S. Export Price Indexes measure the change over time in the prices of goods or services purchased from abroad by U.S. residents (imports) or sold to foreign buyers by U.S. residents (exports). The Import/Export Price Indexes, along with the Consumer Price Index and Producer Price Index, form the basis of three major Bureau of Labor Statistics’ (BLS) programs measuring the change in the prices of goods and services in the U.S. economy. Each of the three has been designated as a Principal Federal Economic Indicator.

NOTE: Although import and export transaction prices are used to calculate the indexes, the International Price Program (IPP) does not publish price information or any information that might allow prices to be inferred.

How are the Import/Export Price Indexes used?

Answer: The Import/Export Price Indexes are primarily used to deflate foreign trade statistics produced by the U.S. Government. The Import/Export Price Indexes are also a valuable input into the processes of measuring inflation, formulating fiscal and monetary policy, forecasting future prices, conducting elasticity studies, measuring U.S. industrial competitiveness, analyzing exchange rates, negotiating trade contracts, and analyzing import prices by locality of origin.

• Deflating trade statistics: Major government trade statistics deflated using the Import/Export Price Indexes—the monthly U.S. trade statistics, the quarterly Balance of Payments Account (BPA) numbers, and the foreign sector of the quarterly National Income and Product Accounts (NIPA). The Import/Export Price Indexes can also be used to deflate any import or export values into real terms.



• Measuring inflation: Movement in import prices can often be an indicator of future inflation since some inputs to domestic production, as well as consumption, are imported.



• Formulating fiscal and monetary policy: The Federal Reserve Board frequently uses the Import/Export Price Indexes as a resource when deciding the nation's monetary policy. Import/Export Price Index data may also assist policymakers in determining the impact of trade legislation on fiscal policy.



• Forecasting future prices: Anticipating future price trends is important to business leaders and those doing research on international prices. A major input into any model used to forecast price trends is past prices. Although past price behavior is not a perfect predictor of future trends, historical patterns and relationships in the Import/Export Price Indexes can contribute knowledge about the future price levels.



• Conducting elasticity studies: Price and income elasticity estimates are often used to examine how much of trade volume changes are attributable to price effects and how much to income effects. The Import/Export Price Indexes can be used to construct price elasticity estimates.



• Measuring U.S. industrial competitiveness: The Import/Export Price Indexes can be used as inputs when measuring U.S industrial competitiveness. These measures include terms of trade indexes, export price comparison ratios, and import and export foreign currency indexes.



• Analyzing the effects of exchange rates: The Import/Export Price Indexes can be used to construct pass-through rates to measure how much of an exchange rate change is passed through to an import or export price.



• Negotiating trade contracts: Import/Export Price Indexes data have been useful in both multilateral and bilateral trade agreements. 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.



• Analyzing import prices by locality of origin: The IPP produces import indexes broken down by locality of origin. These indexes can be used to examine how the U.S. economy is affected by economic variables in other regions.

What goods and services do the Import/Export Price Indexes measure?

Answer: All goods except for military goods, works of art, used items, charity donations, railroad equipment, items leased for less than a year, rebuilt and repaired items, and selected exports (custom-made capital equipment). Covered services are air freight and air passenger fares.

What classification systems are used to aggregate Import/Export price indexes?

Answer: Import and export price indexes for goods are published using the following classification systems:

• Bureau of Economic Analysis End Use System up to the five-digit level. Data are available quarterly from 1980-89 and monthly from 1989 on.



• North American Industry Classification System (NAICS) up to the five-digit level. Monthly data are available from December 2005 on.



• Harmonized Classification System, developed by the Customs Cooperative Council, up to the four-digit level. Monthly data are available from December 1992 on.

Items are classified, respectively, by end use for the Bureau of Economic Analysis System, by industry for the North American Industry Classification System (NAICS), and by product category for the Harmonized System (HS). While classification by end use and product category are self-explanatory, a couple of notes are in order for classifying items by industry. In the NAICS tables, for both imports and exports, items are classified by output industry, not input industry. As an example, NAICS import index 326 (plastics and rubber products) would include outputs such as manufactured plastic rather than inputs such as petroleum.

Import Price Indexes for manufactured and nonmanufactured goods are available by Locality of Origin for select regions. Quarterly data are available from December 1990 to June 1992 and monthly data from September 1992 on.

Import and export service price indexes are classified using the following definitions: Balance of Payments (BOP) – represents transactions between U.S. and foreign residents – and International – represents transactions inbound to and outbound from the U.S.

How are Import/Export Price Index data obtained?

Answer: The International Price Program (IPP) selects sample establishments based upon their relative trade value in imports and exports during the course of a year. After an establishment is selected for inclusion, a BLS field economist visits the establishment to enlist cooperation and to select the exact items that will be priced on a monthly basis. All information provided by the establishment is protected under BLS confidentiality rules.

Sample establishments are asked to provide prices on a monthly basis, as close as possible to the first day of the reference month. Most prices are collected by mailing pre-printed forms to establishment contacts, who fax them to the IPP when completed. In addition, some establishments submit prices via a secure internet address. IPP Industry Analysts collect the remaining prices by telephone or by fax.

What prices are used to calculate the Import/Export Price Indexes?

Answer: The majority of prices used in calculating import price indexes are quoted FOB (Free On Board) Foreign Port and the majority of prices used in calculating export price indexes are quoted FAS (Free Along Ship) U.S. Port; duty is not included. While the International Price Program prefers exit point price bases, point of origin or entry point price bases are used if they are the industry standard.

Are adjustments made for changes in the price or quality of a measured item?

Answer: The IPP attempts to hold the quality of items being priced constant so that the pure price change can be isolated from changes in prices brought about by alterations to the item. When an item price used in index calculation has a specification modification, the IPP adjusts that item's price to reflect any change in the quality of the item.

This means that when a sample item has a modification to one of its features and that modification is reflected in its price, a "link" price is created in order to compare the item's price in the period with the modification to its price in the period before the modification. Creating an adjusted or link price is often referred to as a quality adjustment. A requirement for creating a link price is that the item must remain unchanged in its class, general function, or purpose; otherwise, the price series is restarted.

Examples where an item has had a change in one of its features but the nature of the item and the factors determining price remain the same are: (1) A woman's short-sleeved cotton blouse that is now long sleeved, (2) an uncoated aspirin that is now coated for easier swallowing, and (3) a car with only a driver's side airbag that now has driver's and passenger's side airbags. Link prices are also set for changes in unit of sale specification (e.g. change from price per item to price per dozen), for non-market discounts, and for changes in price basis (see question 5).

To calculate a valid link price, the amount of the price change (a positive or negative amount) associated with the new or different feature must be quantified. For example, a car that sold for $10,000 in September is sold for $11,000 in October. If $400 of the increase is due to an improved paint job, but the remaining $600 is the manufacturer’s annual market increase, then the link price is $10,600.

When a link price is set, the item's price series is continued. If information is not available to quantify a change in the item description, then a link price cannot be calculated and a replacement, if available, is required. With a replacement, the old item's price series ends and the new item's price series begins with a more accurate starting point.

How are the Import/Export Price Indexes weighted?

Answer: The Import/Export Price Indexes are very sensitive to the changing composition of world trade. For this reason, the IPP reweights its published index aggregation structures for goods every year with a two year lag in the weights. This means that relative importance data in 2004 goods indexes are based on 2002 trade values while the relative importance data in 2005 indexes are based on 2003 trade values. The IPP also resamples each half of the import/export universe every other year. The aggregation structure below the published level incorporates the use of sampling weights in the estimator. Sampling weights generally change every two years when a new sample is drawn for a given product area.

How are the Import/Export Price Indexes constructed?

Answer: The formula used to calculate the Import/Export Price Indexes is a modified form of the Laspeyres index. A Laspeyres index uses fixed base period quantities to aggregate prices. This means that the quality of goods and services is fixed; new goods do not appear, and the prices of goods that disappear must be observable. Because these implications are not consistent with the actually workings of the economy, adjustments must be made to the index.

NOTE: All Import/Export Price Index data are not seasonally adjusted.

For more information: BLS Handbook of Methods, Chapter 15, International Price Indexes.

How the Import/Export Price Indexes interpreted?

Answer: An index is a tool that simplifies the measurement of movements in a numerical series. Movements are measured with respect to the base period when the index is set at 100. Currently, most Import/Export Price Indexes have an index base of 2000=100 and price changes are measured in relation to that figure. For example, a November 2004 Import Price index of 107.0 for beverages indicates that there has been a 7 percent increase in price since 2000. Similarly, a November 2004 Import Price Index of 73.0 for computers means that there has been a 27 percent decrease in price since 2000.

While movements between two dates can be expressed as index point changes, it is more useful to express the movements as percent changes. As the example below indicates, the Export Price Index for Food and Live Animals was 118.0 in November 2004 and 115.3 in November 2003, an index point increase of 2.7. Using the formula shown, it is determined that this index point increase represents a 2.3 percent price increase from November 2003 to November 2004.

Index Point Change
Export Price Index 11/04	118.0
Less previous index 11/03	115.3
Equals index point change	2.7
Index Percent Change
Index point change	2.7
Divided by the previous index	115.3
Equals	0.023
Result multiplied by 100	0.023 x 100
Equals percent change	2.3

When are Import/Export Price Index data available?

Answer: The IPP publishes the Import/Export Price Indexes monthly. The information is released at 8:30 AM Eastern Time, usually during the second week following the reference month. Click on the link below to see the current list of release dates.

Import/Export Price Index Release Dates

The monthly release includes first-published data for the reference month, as well as revised data from the previous three months. For example, the November 2004 “U.S. Import and Export Price Indexes,” released on December 9, 2004, contains first-published data for November 2004, and previously published indexes for October, September, and August that were subject to revision. The December 2004 “U.S. Import and Export Price Indexes,” released on January 13, 2005, contained first-published data for December 2004 and previously published indexes for November, October, and September that were subject to revision.

Are there limitations to the Import/Export Price Indexes?

Answer: Although import and export transaction prices are used to calculate the Import/Export Price Indexes, the IPP does not publish price information. For this reason, the Import/Export Price Indexes cannot be used to measure differences in price levels among different products and services or among different localities of origin. A higher index number for locality A (or product X) does not necessarily mean that prices are higher than for locality B (or product Y) with a lower index number. It only means that prices have risen faster for locality A (or product X) since the reference period.

Because the Import/Export Price Indexes are primarily used as deflators, care must be exercised when using these data for other purposes. For example, import price data exclude charges for duties.

How does the International Price Program handle survey items that are priced in foreign currencies?

Answer: About 5-10 percent of imports and exports currently surveyed are priced in foreign currencies. The IPP uses an exchange rate factor that is an average for the month prior to the pricing month.

How do unit value indexes differ from the Import/Export Price Indexes?

Answer: A unit value index measures the change in the value of items regardless of whether the items are homogeneous and, therefore, can be affected by changes in the mix of items as well as changes in their prices. In contrast, a price index reflects an average of the proportionate changes in the prices of a specified set of items.

A disadvantage of a unit value index is that it reflects changes in the product mix at the finest level of detail independent of price change. For instance, a unit value index would decrease in the case of a shift from luxury cars to economy cars within a product category, even when all the prices for each item remained constant. In addition, unit value indexes do not take into account changes in a product’s specification. For instance, adding passenger side air bags to a car would cause the unit value index to increase. A price index, however, controls for changes in product specifications and would not increase in this instance.

Because of the limitations mentioned, import and export unit value indexes are not interchangeable with import and export price indexes for deflating foreign trade and growth statistics.

Does the Bureau of Labor Statistics provide data for countries other than the U.S.?

Answer: The BLS Foreign Labor Statistics (FLS) Program provides international comparisons of hourly compensation costs; productivity and unit labor costs; labor force, employment and unemployment rates; and consumer prices. The comparisons relate primarily to the major industrial countries, but other countries are included in certain measures. More information is available from the Foreign Labor Statistics (FLS) Program, (202) 691-5654.

Where can I obtain international price information?

Answer: The Department of State publishes a quarterly report containing indexes of living costs abroad, quarters allowances, hardship differentials, and danger pay allowances. This information is compiled by the Office of Allowances for use in establishing allowances to compensate U.S. Government civilian employees for costs and hardships related to assignments abroad. More information is available from the Department of State, (202) 663-1121.

Comparative price level and purchasing power parity information is available from the Organisation for Economic Cooperation and Development (OECD), (202) 785-6323.

The Center for International Comparisons at the University of Pennsylvania (CICUP), (215) 898-7624, compiles the Penn World Tables which provides purchasing power parity and national income accounts converted to international prices for 179 countries for some or all of the years 1950-2000.

Where can I obtain more information about the Import/Export Price Indexes?

Answer: For specific details about how to obtain additional information, please click on the following: Contact Us.

 

Last Modified Date: February 15, 2008