Attachment 17 MLR article IPP 2008 year in review

Import and Export Price Trends

IPP 2008 year in review
On the whole, import and export prices rose sharply during
the first 7 months of 2008 and then plunged during the last
5 months of the year; energy goods, most notably petroleum,
led the price increases and decreases
Edwin Bennion

Edwin Bennion is an economist
in the Office of Prices and
Living Conditions, Bureau of
Labor Statistics. E-mail:
[email protected]

I

mport and export price movements
through the first 7 months of 2008
contrasted sharply with those seen
in the last 5 months of the year. During
the first 7 months of the year, import
prices and export prices reached their
highest levels since first being published
in 1982 and 1983, respectively. Import
prices climbed 15.9 percent over the period, while export prices rose 7.3 percent.1
The respective increases in import and
export prices over the first 7 months of
2008 were larger than any annual price
increase dating back to the inception of
both the import and export price indexes.
The largest annual increase for imports, a
10.6-percent rise, occurred in 2007, and
the largest increase for exports, a 6.0-percent rise, also took place in 2007. Large
price gains for fuel and precious metals, as
well as a decline in value of the U.S. dollar,
contributed towards the increases in both
import and export prices. Large increases
in the prices for agricultural commodities
also contributed to the overall advance in
export prices.
Prices for both imports and exports
peaked in July 2008 and then, in August,
began a precipitous drop that continued
through the end of the year. During the
final 5 months of the year, the drop in
both import and export prices left each
index down overall for 2008. Between
August and December, import prices de-

clined 22.4 percent and export prices fell 9.5
percent. For 2008 as a whole, import and export prices were down for the first time since
2001, with the import index and the export
index each exhibiting its largest decline since
it was first published. Price decreases for fuel
and precious metals, a turnaround in the value
of the U.S. dollar, and drops in agricultural export prices were the major contributors to the
overall price declines in the final 5 months of
the year.
Other

price measures

In addition to the Import Price Index and
the Export Price Index, the Bureau of Labor
Statistics publishes other indexes that track
monthly price changes. Two of these are the
Consumer Price Index for all Urban Consumers (CPI-U), which measures the prices of goods
and services purchased by urban households;
and the Producer Price Index (PPI), which
measures the prices that domestic producers
receive for their output.
Although the magnitudes of the changes
differed, both the CPI-U and the PPI experienced changes similar to those of the Import
and Export Indexes. Increases throughout the
first 7 months of the year, due to surges in
prices for fuel and precious metals, were followed by decreases in the prices of the same
commodities; the result was overall declines in
the indexes for the year. Many of the market
forces that were affecting import and export
Monthly Labor Review  •  April 2010  19

Import and Export Price Trends

prices in 2008, especially volatile energy prices, also affected the CPI-U and PPI. The similarity in movement
among the four indexes is evident in chart 1.
During the first 7 months of the year, the CPI-U increased 4.7 percent. Contributing towards the overall
increase in the CPI-U were rapidly increasing prices for
energy. During the first 7 months of the year, the energy price component of the index rose 29.1 percent,
led by gasoline prices, which climbed 35.3 percent.
This was a continuation of trends that took place in
2007, when the CPI-U increased 4.1 percent, driven by
a 17.4 percent increase in energy prices.
With the onset of August the CPI-U began to decline. Over the course of the final 5 months of the year,
the CPI-U fell 4.4 percent, ending the year up 0.09 percent. After leading the index on its way up over the
first 7 months of the year, the energy component was
responsible for the fall of the index over the remaining
5 months of the year, decreasing 39.1 percent over that
period and 21.3 percent for the year.
The movement of the Producer Price Index was
similar to the movements of the other three indexes
throughout 2008. From January 2008 through July
2008, the PPI increased 15.1 percent, largely because
of higher fuel prices. Prices for fuels and related prod-

ucts rose 39.5 percent. The summer brought about a change
in the movement of the index. From August to the end of the
year, the PPI declined 16.8 percent overall while prices for
fuel and related products fell 45.8 percent. For the year, the
PPI decreased 4.3 percent, the first annual decline since 2001.

Import price trends through July
During the first 7 months of 2008, import prices increased
15.9 percent, a larger increase than had occurred throughout
2007. The rapid rise in energy prices from March through
July of 2008 was a major contributor to the overall increase
in import prices, and price gains for precious metals also contributed to the rise in import prices.
Energy.  Energy prices were the primary contributor in
driving import price measures to record-high levels through
the first 7 months of 2008. Prices for petroleum, petroleum
products, and natural gas climbed steadily through the first 7
months of the year. Petroleum prices climbed 51.6 percent,
continuing the upward trend of 2007 when the index rose
48.1 percent. The price of light, sweet crude oil surged to a
record high on July 3, peaking at $145.31 per barrel.2
Trade in the futures markets appears to have played a
major role in the increase of oil and other commodity prices

Chart 1. Monthly changes in the CPI-U, PPI, and import and export indexes, 2008
Percent
change

Percent
change

4

4

2

2

0

0
CPI-U

–2

–2
Exports

–4

PPI

–6

–4

–6

Imports
–8
Jan.

Feb.

Mar.

20  Monthly Labor Review  •  April 2010

Apr.

May

June

July

Aug.

Sept.

Oct.

Nov.

–8
Dec.

through the first 7 months of 2008. In December of 2007
the Federal Reserve of the United States cut the Federal
funds rate to a target range of zero to one-quarter of a
percent, a level not seen since World War II. A number
of other factors also helped spur global investment in
the commodities markets; three of these factors were a
weak U.S. dollar, concerns of impending inflation, and
depressed real estate values. In the first quarter of 2008,
global investments in commodities rose to more than
$400 billion.3 An estimated $70 billion in additional investment funds flowed into the global commodities market, much of it on a speculative basis from such sources as
pension funds, commercial banks, and other large investors. The large volume of futures contracts being traded in
2008 bore witness to the increase in the amount of money
being invested in a wide range of commodities, but especially in oil. Noncommercial traders, as defined by the U.S.
Commodity Futures Trading Commission, accounted for
approximately 20 percent of all long open-interest futures
positions for crude oil on the New York Mercantile Exchange in February of 2007. Over a year later, in May of
2008, the number had risen to almost 37 percent of long
open-interest futures positions. The New York Mercantile
Exchange reported a 71.5-percent increase in the year-todate volume of energy futures contracts during the same
period. The number of energy futures contracts in 2008
was almost 339 million, up from a total of 190 million in
2007.4 Such an influx in trading activity was also evident
on the electronic exchanges. Intercontinental Exchange, a
major electronic exchange for global commodity trading,
also experienced large increases in trading volumes for
petroleum futures. From May 2007 to May 2008, the volume of futures contracts for Brent Crude, a type of crude
oil used as a benchmark in global oil pricing, swelled to
6.7 million futures contracts, a 23.5-percent increase from
about 5.4 million.5
There were a number of factors that contributed to
the increase in oil prices during the first several months
of 2008. Falling crude inventories in the United States
was one such factor. In March, the Energy Information
Administration announced that crude inventories in the
United States fell by 3.1 million barrels in the month of
February to 305.4 million barrels, a level substantially
lower than what many investors had expected.6 This drop
exacerbated fears that an already tight balance between
supply and demand would grow more precarious.
Continued robust demand on the part of China, the
world’s second-largest oil-consuming market, also gave
strength to prices throughout the first 7 months of 2008.
Chinese demand for crude oil in March 2008 had in-

creased by 25 percent from a year earlier, as reported by
the Customs General Administration of China.7 Some
of this increase in demand was attributed to agricultural
needs as the planting season began. The approach of the
Olympic Games, held in Beijing, also contributed to increased demand on the part of China. China stockpiled
large reserves of fuel to ensure a steady and uninterrupted
supply of petroleum to provide for transportation and energy needs during the games.
A number of geopolitical incidents affected the price of
oil in the first half of 2008. In March, the United Nations
Security Council issued sanctions against Iran in response
to its nuclear program. Increased tensions between Iran
and the United Nations raised fears that Iran might retaliate by disrupting the flow of oil coming from the Persian Gulf nations, especially those which ship petroleum
through the Strait of Hormuz. The 16.5 million to 17 million barrels of petroleum that pass through the Strait of
Hormuz on a daily basis make the Strait the world’s most
important transit route for oil, and any disruption of this
route would have had a significant impact on the flow of
oil to the global market.8
Supply disruptions caused by militant attacks in the
Niger River delta and on offshore production facilities
in Nigeria helped drive prices of oil higher throughout
the spring of 2008. Though not a major threat to world
supply, the attacks in Nigeria, the world’s 14th-largest
producer of oil in 2008, rattled the market.9 Geopolitical
incidents such as the Nigerian attacks and the increased
tension between Iran and the United Nations drove prices
for petroleum higher as the markets reacted in a fearful
manner to the news rather than reacting in a way more
consistent with the actual impact that the aforementioned
events were having on the supply of petroleum to the international market at the time.
Another factor that contributed to higher fuel prices in
the spring and early summer of 2008 was the weak U.S.
dollar, which had declined 3.9 percent during the period
as measured by the Federal Reserve’s Nominal Broad
Dollar Index.10 (See chart 2.) The dollar reached its lowest
value in July of 2008, the same month that petroleum set
its record-high price. Because oil is priced in U.S. dollars,
the declining value of the U.S. dollar mitigated the rise in
oil prices in many other currencies.11
Prices for natural gas followed the same trend as those
for petroleum. During the first 7 months of 2008, prices
for natural gas climbed 59.3 percent, reaching a level not
seen since the closing months of 2005. The large price
increase of 2008 does not appear to have been caused
by the same market forces that typically shift the price
Monthly Labor Review  •  April 2010  21

Import and Export Price Trends

Chart 2. Nominal Broad Index of the U.S. dollar, January 2007–December 2008
Index
115

Index
115

110

110

105

105

100

100

95

95

90
Jan. ‘07 Mar. ‘07 May ‘07

July ‘07 Sept. ‘07 Nov. ‘07 Jan. ‘08 Mar. ‘08 May ‘08

of natural gas, because the rise in price was at odds with
usual price trends for imported natural gas. Under normal
seasonal patterns prices climb in the winter months, fall
in the summer, and rebound as winter approaches towards
the end of the year. According to the Energy Information
Administration, consumption in the United States was
little changed from 2007, increasing only 0.1 percent, and
temperatures through the first 7 months of the year were
fairly mild.12 A substantial force behind the large increase
in natural gas prices was the large amount of investment in
energy commodities that took place in 2008. As appeared
to be the case with petroleum, the volume of natural gas
futures contracts rose significantly from 2007 to 2008. On
the New York Mercantile Exchange, the volume of futures contracts for natural gas increased by 20.0 percent,
from 29,786,318 in 2007 to 38,730,519 in 2008.13
Raw materials.  The index for imports of raw materials
and industrial supplies excluding petroleum, natural gas,
coal, and other energy commodities increased steadily
over the first 7 months of 2008. From January through the
end of July, prices for raw materials and industrial supplies
increased 16.9 percent. This increase continued the trend
from the previous year, during which prices had increased
7.4 percent. The major contributors to the overall increase
22  Monthly Labor Review  •  April 2010

July ‘08 Sept. ‘08 Nov. ‘08

90

were metals, both precious and nonprecious, and chemicals.
Nonmonetary gold prices increased 10.2 percent
through the first 7 months of the year, continuing a steady
rise in price dating back to 2001. Gold became a very attractive investment when the U.S. Federal Reserve cut
interest rates to record-low levels. Gold has traditionally been viewed as a reliable store of wealth and a hedge
against inflation. As concerns regarding the state of the
U.S. economy and the relative strength of the U.S. dollar mounted, investors turned to gold as a perceived safe
investment.14
Other precious metals excluding gold also experienced
large price increases during the first 7 months of the year.
Prices for these metals, which include silver, platinum,
palladium, and rhodium, rose 29.1 percent during the
first 7 months of the year, with platinum prices increasing to record levels. Supply shortages in South Africa, the
world’s largest producer of the platinum group of metals, were a major contributor to the increase in platinum
prices. Unlike gold, platinum is much more of a commercial commodity than an investment. Of the 239,000 kg
of platinum sold in 2006, 130,000 kg were used in the
production of automobile emissions control devices and a
large percentage of the remaining platinum sold went to-

wards other industrial applications.15 Prices for platinum
are therefore driven largely by supply and industrial demand. Production in South African mines fell by over 10
percent as Eskom, South Africa’s national power generator, was unable to meet the demand for electricity. Many
mines were forced to operate with only 80 to 90 percent of
their power supply, and as a result production suffered.16
Owing to South Africa’s position as the world’s largest
producer of platinum, the decrease in production on the
part of South Africa’s mines drove platinum prices higher.
Steel, iron, and other nonferrous metals such as copper experienced significant price increases through the
first 7 months of 2008 as well. Prices for iron and steel
climbed 41.1 percent during the period after having risen
8.1 percent in 2007. The world’s leading iron ore producer,
Brazil’s Vale, set the prices for iron ore significantly higher
at the beginning of February.17 One of the causes of the
price increases of 65 percent to 71 percent was continued
high demand on the part of China’s robust steel industry. While North American and European demand for
steel was tepid at best, demand was still robust in many
developing nations such as India and China where construction continued at a strong pace. Copper prices, which
plummeted at the start of the year, climbed 22.2 percent
from February through the month of May and, despite
a decline in July, were still up 17.6 percent at that time
compared with prices in January. In April labor unrest
in three mines in Chile helped drive copper prices up on
the London Metal Exchange.18 As with other metals, and
commodities in general, copper rose in price during the
first 7 months of the year, driven up in part by the depreciation of the U.S. dollar against major world currencies
along with fears of impending inflation.
Prices for chemicals excluding medicinals climbed 19.3
percent through the month of July, after an increase of
10.6 percent in 2007. Fertilizers, pesticides, and insecticides, which increased in price by 59.2 percent, were
a major contributor to the overall increase of chemicals
prices. As agricultural commodities climbed in price,
farmers turned to fertilizers as a means of increasing crop
yields.19 Both the U.S. and world fertilizer industries were
unable to quickly adjust to the surging demand for fertilizers. Rising energy prices also contributed to the rise in
prices for fertilizer, because higher energy prices drove up
production costs for fertilizers.
Finished goods.  Prices for imports of finished goods,
including capital goods; automotive vehicles, parts, and
engines; and consumer goods also were on the rise during
the first 7 months of 2008. Prices for passenger vehicles

continued to increase through July of 2008, continuing a
trend that started in the mid 1990s. Prices rose 0.3 percent from January 2008 to July 2008 after a 2.4-percent
annual increase in 2007. Auto parts, engines, bodies, and
chassis increased in price by 1.6 percent during the first 7
months of 2008. Several factors helped drive up import
prices for these goods. One of the factors was the depreciation of the U.S. dollar against the Canadian dollar, the
yen, and the euro. As was previously mentioned, the Federal Reserve’s Nominal Broad Dollar Index declined 3.9
percent for the period.
Rising prices for inputs such as steel also pushed up
prices for auto parts and passenger vehicles.20 Steel manufacturers, dealing with higher costs for iron ore and energy, raised prices for items such as sheet steel, which is used
in the manufacturing of autobodies, to reflect the higher
costs of manufacturing. In response, several auto manufacturers raised vehicle prices to offset erosion in earnings
brought about by the higher price of steel.21
After rising steadily throughout 2007, prices for capital and consumer goods continued to rise throughout the
first 7 months of 2008. A major contributor to the increases was increasing petroleum and metals prices. The
weakening of the U.S. dollar against such currencies as the
yen and the euro also drove prices higher as many businesses renegotiated contracts at the beginning of the year
in order that they reflect the weaker dollar.
Prices for computers and home entertainment equipment were exceptions to the upward trend: prices for
computers declined by 2.9 percent from January 2008 to
July 2008, while home entertainment equipment prices
declined by 1.3 percent. Increasing worldwide sales and
economies of scale are two of the reasons for falling HD
and flat-screen television prices.22 It was mainly a combination of weakening demand and increased competition
that drove down computer prices.

Export price trends through July
Prices for exports increased significantly during the first 7
months of 2008, rising 7.3 percent. This 7-month increase
was larger than any annual increase the index had experienced in the last two decades. Agricultural commodities
such as soybeans and corn were major contributors to the
overall increase in export prices. Rising prices for precious
metals also contributed to the overall increase in export
prices from January through July.
Agricultural products.  As with petroleum, prices for
exports of agricultural commodities were quite volatile
Monthly Labor Review  •  April 2010  23

Import and Export Price Trends

throughout 2008. During the first 7 months of the year,
prices climbed 23.6 percent, which almost mirrored the
23.4-percent annual increase from 2007. During 2008 export price trends were dominated by rising prices for corn
and soybeans.
Corn prices climbed steadily within the first 7 months
of the year, increasing 63.7 percent. The influx of investment in futures markets that took place during the
early part of 2008 and contributed to rising oil and gold
prices also affected prices for agricultural commodities.23
In May of 2008 noncommercial investors held nearly
463,000 long futures contracts in the Chicago Board of
Trade corn futures. By comparison, at the end of May of
2007 there were slightly under 340,000 noncommercial
long contracts.24
Weather also played a role in driving up corn prices
during the first 7 months of 2008. Heavy rainfall during
the spring delayed planting in the Corn Belt, stoking fears
that there would not be sufficient acreage planted to meet
growing demand. Flood waters inundated large areas of
the Midwest in June, which further exacerbated fears of a
diminished harvest. Iowa was especially hard hit, with approximately 1.2 million acres used for corn, or 1.5 percent
of the country’s anticipated harvest, waterlogged. These
flooded acres were land either on which farmers needed
to replant or on which they had not yet planted because
of the water.25 As a result of the heavy rainfall throughout
the Midwest, the United States Department of Agriculture (USDA) lowered its forecast for the U.S. corn harvest
by 3.2 percent. The original forecast of 12.1 billion bushels
was reduced to 11.7 billion bushels.26
Increased export demand also drove up both corn and
soybean prices in 2008. Because of the weakening of the
U.S. dollar in relation to other currencies, foreign demand
for U.S. agricultural products increased as they became
much cheaper for foreigners to purchase in relation to agricultural products from many other countries. As global
demand for meat rose, feed usage also increased, with
much of the world turning to the United States as a source
of animal feed. USDA increased its corn export forecast to
2.45 billion bushels, which was an all-time high.
Soybean prices rose 47 percent through the month
of July despite an estimated 74.5 million acres planted,
which was the third-largest area on record and a 17-percent increase from the previous year. The same factors
that drove up corn prices also contributed to the rise in
soybean prices. Increased investment in agricultural commodities, poor weather, the weakening U.S. dollar, and
high export demand all played their part. In the month
of July, soybean prices reached a record high of $16 per
24  Monthly Labor Review  •  April 2010

bushel. Flooding in the Midwest brought about a reduction in the percent of acres that would be planted, from
98.1 percent to 96.8 percent.27 The flooding cut planted
acreage by 3.7 million acres, and harvested acreage was
expected to drop by 1.3 million acres. In June of 2008,
soybean inventories were estimated to be 676 million
bushels, down 38 percent from 2007 and the lowest level
in 4 years. Prices for soybeans rose significantly in reaction
to the news of low inventory.
Raw materials.  Price trends for raw material exports
were very similar to those of raw material imports, though
of differing magnitudes. During 2007 prices for raw materials were steadily on the rise, increasing 10.5 percent,
and the trend continued through the first 7 months of
2008. Through July of 2008 prices rose 15.4 percent, with
especially large increases taking place in May, June, and
July.
Prices for exported chemicals were on the rise, increasing 13.5 percent from January to July of 2008. As with
their import counterparts, prices for exports of chemicals,
specifically fertilizers and petrochemicals, were driven up
by higher levels of demand, due to high agricultural commodity prices, and the rising price of oil. Fertilizer prices
increased sharply in the early months of 2008 because
of strong demand generated by exceptionally high global
prices for agricultural commodities. In response to the
high prices, farmers across the globe turned to fertilizers
in an attempt to boost yields. Rising crude oil prices also
drove up prices for petrochemicals such as benzene and
ethylene, which in turn drove up prices for organic chemicals that are manufactured from them. Several gasoline
additives also were increasing in price, mainly because
these fuel additives routinely move in conjunction with
petroleum prices.
Export metals prices also were on the rise through
the month of July. The depreciation of the U.S. dollar
against numerous world currencies coupled with rising
global steel prices made U.S. exports of steel quite attractive for foreign buyers.28 During the first 2 quarters
of 2008, the United States exported 4.9 million tons of
steel, a 19-percent increase from the same period in 2007,
making the United States the 8th-largest steel exporter.29
Most of the steel exported was destined for Asia and the
Asian Near East (more commonly known as the Middle
East), where demand remained strong throughout the
early part of the year. Prices for exports of precious metals also were on the rise. The same factors that drove up
prices for imported precious metals drove up prices for
exported precious metals.

Finished goods.  Prices for exports of finished goods all
rose through the month of July. Prices for automotive vehicle parts, engines, and bodies increased 1.2 percent during the aforementioned period. As with imports, the main
reason for the increase in prices of exports was materials
costs. As steel and other metals rose in price, the production of automotive parts became more costly. The same
was true for household and kitchen appliances, which increased 3.6 percent in price. Prices for industrial and service machinery also increased over the same period. The
rising costs of materials such as steel were a driving force
behind the increases. Consumer goods prices were on the
rise as well, most notably in the form of rising jewelry
prices. Increasing gold and other precious metals prices
helped drive the price of jewelry higher.

Import price trends for August–December
From August through the end of the year, the Import
Price Index declined 22.4 percent and finished the year
down 10.1 percent. Before 2008, the last decline in import
prices took place in 2001, when import prices declined 9.1
percent for the year. It appears that the same commodities
and products that drove the index up through the first 7
months of the year were responsible for the index’s decrease over the final 5 months.
Energy.  Prices of imported petroleum and petroleum
products began their precipitous drop in August and, over
the final 5 months of the year, fell 67.6 percent to end the
year down 50.8 percent. Turmoil in the global financial
sector brought about an overall slowing of economic activity across the globe, especially in developed countries,
and thus decreased demand for energy.30 In the United
States unemployment figures rose to their highest levels
in 25 years while GDP shrank, both of which indicated a
worsening of the U.S. economy. Lower economic activity
and concomitant softening demand for petroleum were
significant factors in the decline of prices for petroleum.
Drivers in the United States reduced the number of
miles driven as gas prices increased. Fifteen billion fewer
vehicle miles were driven in August of 2008 in comparison
with August of 2007, a 5.6-percent decline. By the end of
the year, Americans had driven 108 billion fewer vehicle
miles for the year 2008, a 3.6-percent decrease from the
previous year.31 The large decrease in miles driven, intensified by the growing global recession, bolstered fears of
slackening demand for oil.
As economies around the world faltered and concerns
of inflation subsided, the U.S. dollar underwent a very

large appreciation, which also contributed to falling petroleum prices. The popularity of the U.S. dollar as a safe
haven in times of economic troubles helped it appreciate against the other major world currencies.32 Because
crude oil is priced in U.S. dollars, the appreciating value of
the dollar made oil more expensive for buyers in foreign
countries, resulting in reduced demand.
Geopolitical events, which had affected petroleum and
energy prices during the first 7 months of 2008, appear
to have had a relatively little impact on petroleum and
energy prices over the final 5 months of the year. Supply
disruptions in Nigeria, due to continued militant attacks;
OPEC production cutbacks; an explosion on a portion of
the Baku-Tblisi-Ceyhan pipeline in Turkey; and Tropical Storm Edouard, which made landfall south of Port
Arthur, Texas, all did little to hinder the fall of oil prices.
Starting in June many investors exited the energy markets.
By October of 2008, the number of open-interest futures
contracts held by noncommercial traders, as defined by
the Commodity Futures Trading Commission, had fallen
by 19.7 percent from May and accounted for only 29 percent of all positions for crude oil on the New York Mercantile Exchange.
Raw materials.  Prices for imports of raw materials spent
the final 5 months of 2008 steadily declining. During
these 5 months, prices for raw materials declined 14.7
percent, ending the year just 0.2 percent below where
they began the year. After a slight increase in the price
of gold in August, prices declined for the rest of the year,
with notably large decreases in September and December.
Investors flocked to gold during the first few months of
2008, but, as signs mounted that the economies of the
United States and other developed nations were headed
for or already in a recession, concerns of inflation quickly
evaporated. Investors removed hedges against high global
inflation and abandoned many positions on commodities
such as oil and gold.33 As the fear of inflation dissipated,
the U.S. dollar staged a large recovery in value against the
other major world currencies, making gold an even less
attractive investment.
Other precious metals such as silver, platinum, and palladium experienced even more precipitous price declines
over the final 5 months of the year. Platinum, which is
used primarily as an industrial metal, especially in the
construction of automobile emissions control devices, fell
in price by more than 50 percent in the final 5 months
of the year, from a record high of over $2,000 an ounce.
As the global economy fell into recession, demand for the
metal declined as production of automobiles, especially
Monthly Labor Review  •  April 2010  25

Import and Export Price Trends

large SUVs, fell.34 The attractiveness of silver as an investment in the same guise as gold also lessened as the specter
of inflation from earlier in the year dissipated.
Prices for steel and iron continued to climb through the
month of September and then quickly plummeted during
the final 3 months of the year, falling 26 percent from
the highs reached in September. Dwindling demand, due
to the onset of the global recession, helped drive down
steel prices as construction and manufacturing activity
declined. Copper prices also plummeted, falling 43.3 percent. The struggling housing market in the United States
had severely reduced copper prices, due to copper’s important role in residential construction. Large surpluses
of copper on the international market helped bring about
lower prices and, as construction in Asia started to decline, copper prices fell even more. By August there was
a surplus of 125,000 metric tons in the market.35 From
the start of August through the end of the year, copper
prices declined 43.3 percent and finished the year down
41.8 percent compared with a year earlier.
Finished goods.  Prices for finished goods imports over
the final 5 months of 2008 were in line with those of
other imports, save a few exceptions. As with the other
categories of imports, price declines in finished goods
were gradual through the summer and fall but by the end
of the year had become quite pronounced.
After climbing by 1.6 percent through the first 7
months of the year, prices for capital goods peaked in July,
remained unchanged in August, and then began a steady
decline through the rest of the year, falling 0.7 percent.
A resurgent U.S. dollar played a significant role in the
decline of import prices. The Federal Reserve’s Nominal
Broad Dollar Index increased 13.7 percent over the final 5
months of 2008. The strengthening of the U.S. dollar, especially against the euro, Canadian dollar, British pound,
and several currencies from Asian countries (although not
the yen), helped drive down import prices.
Worsening economic conditions, in both the United
States and the rest of the world, also contributed to the
decline of import prices for finished goods. Both domestically and internationally, economies started to falter,
which brought about a decline in consumer expenditures,
contractions within the manufacturing sector, and falling
prices. The GDP of the United States, as measured by the
Bureau of Economic Analysis at the U.S. Department of
Commerce, began its decline in the third quarter of 2008
and dropped steeply in the final quarter of the year, evident in chart 3. By the end of the year, GDP had receded to
a level not far from that of the first 2 quarters of 2007. A
26  Monthly Labor Review  •  April 2010

wide range of factors such as job loss, a severe reduction in
credit, falling home prices, and a declining stock market
put consumers under severe stress in the latter 2 quarters
of 2008. Declining personal consumption expenditures
in the final quarter of the year went hand in hand with
marked decline in GDP. Consumers spent an estimated
$210 billion less in the fourth quarter of 2008 than they
had a year earlier.

Export price trends for August–December
The final 5 months of 2008 bore witness to declining
import and export prices, as well as a decline in the U.S.
trade deficit. Overall levels of both imports and exports of
goods and services also fell during the closing months of
the year, as is illustrated in chart 4. After growing steadily
during 2007 and the first 7 months of 2008, both imports
and exports declined sharply with the onset of autumn.
From August through the end of the year, imports fell
23.8 percent and exports declined 19.2 percent. Waning demand for both imports and exports, due to poor
economic conditions both domestically and abroad, was
responsible for the declines. Falling crude oil prices were a
major contributor to the reduced trade deficit in the closing months of 2008, though a resurgent dollar did lessen
the impact to some extent. Even with the strengthening
of the U.S. dollar, the U.S. trade deficit was the smallest it
had been in 6 years as of December of 2008.
As has already been noted, the index for export prices
peaked in July of 2008. During the final 5 months of the
year, the index fell steadily and, by the end of the year,
reached a level that had not been seen since the opening
months of 2007. As was the case with imports, the major
contributors to the index’s rise during the first 7 months
of the year were also those primarily responsible for the
index’s decline during the last 5 months of the year.
Agricultural products.  Declining corn prices were a major
contributor to the overall decline in export prices. After
reaching record highs during the first 7 months of 2008,
a period in which prices experienced some of the largest
gains of the last decade, prices dropped precipitously over
the final 5 months of the year. From the start of August
through the end of the year, prices fell by 51 percent, to a
level not seen since autumn of 2006. A number of factors
contributed to the decline in corn prices.
In August 2008, USDA’s National Agricultural Statistics Service released new estimates for spring-planted row
crops. Corn production was forecast to total 12.3 billion
bushels, with expected yields to average 155 bushels per

Chart 3. Gross Domestic Product of the United States, 2006–08
Billions
of dollars

Billions
of dollars
13,500

13,500

13,400

13,400

13,300

13,300

13,200

13,200

13,100

13,100

13,000

13,000

12,900

12,900

12,800

12,800

12,700

12,700

12,600

12,600

12,500

Q1

Q2

Q3
2006

Q4

Q1

Q2
2007

Q3

Q4

Q1

Q2

Q3

Q4

12,500

2008

Chart 4. Levels of imports into and exports out of the United States, January 2007–December 2008
Millions
of dollars
240,000

Millions
of dollars
240,000

220,000
200,000

220,000
Imports

200,000

180,000

180,000

160,000

160,000

140,000
120,000

Exports

140,000
120,000

100,000
100,000
Jan. ‘07 Mar. ‘07 May ‘07 July ‘07 Sept. ‘07 Nov ‘07 Jan. ‘08 Mar. ‘08 May ‘08 July ‘08 Sept. ‘08 Nov. ‘08

Monthly Labor Review  •  April 2010  27

Import and Export Price Trends

acre, the second-highest yield on record.36 Earlier in the
year the USDA had reduced its crop forecasts for corn because of deluges that had severely affected the Corn Belt
through much of the planting season. The forecasts of
August greatly allayed fears that the 2008 crop would be
significantly lower than the previous year and did much
to relieve pressure on prices. During the month of August
prices fell by 28.6 percent.
As summer gave way to fall and fall to winter, prices for corn continued to decline. Prices declined by 17
percent in October and 16.7 percent in December. Uncertainty regarding the overall global economic outlook
helped dampen demand for grain.37 As signs of a global
economic downturn grew stronger, the attractiveness of
commodities as an investment was greatly reduced. Along
with the decline in export demand, the strengthening of
the U.S. dollar over the last 5 months of the year helped
drive down the price of corn.
Prices for soybeans and other oil seeds followed much
the same trend as corn prices. After reaching never-before-seen highs in July of 2008, in the final 5 months of
the year prices for soybeans and other oil seeds receded to
levels in line with those of late 2007, completely erasing
the record gains of 2008. Many of the same factors that
contributed to the decline in corn prices also drove soybean prices down. In August, the National Agricultural
Statistics Service forecast soybean production at 2.97 billion bushels for 2008, up 15 percent from the previous
year.38 Fears had persisted that the worst flooding to hit
the Midwest since 1993 would severely hamper planting
and would result in a lower-than-anticipated crop yield.
The strengthening of the U.S. dollar coupled with the
overall decline in the attractiveness of commodities also
helped drive down soybean prices.
Raw materials.  Over the final 5 months of 2008, export
prices for raw materials steadily declined, falling 21.5
percent to a level on par with that of December of 2006.
Prices for raw materials finished the year down 9.4 percent from a year earlier; 2008 was the first year that prices
had declined since 2001.
Exported metals dropped in price significantly over the
last 5 months of 2008. Prices for steel and iron products
declined 9.9 percent. Demand for American steel declined in the latter half of 2008 as economies around the
globe started to slow and the likelihood of a global recession loomed. China, in particular, scaled back demand
for steel in the fall of 2008 because of the slowdown of
construction in China and the rest of the world. Demand
on the part of automobile manufacturers also declined as
28  Monthly Labor Review  •  April 2010

the number of vehicle sales slowed.
Prices for nonmonetary gold and other precious metals also declined during the final 5 months of the year.
Gold declined in price by 14.8 percent, and prices for
other precious metals fell 45.6 percent. Many investors
turned away from gold as concerns of inflation subsided,
economies around the world started to slow, and the U.S.
dollar regained some of the value it had lost in the early
months of 2008. Prices for the platinum metals group also
fell sharply through the latter part of 2008, though not
for the same reason as gold prices. The demand for platinum fell sharply as automobile sales, especially of larger
vehicles, declined.
As with metals prices, prices for chemicals were on the
decline from August through the end of the year, falling 12.7 percent. Export chemicals prices finished 2008
down 0.9 percent for the year, which was the first annual
decline since 2001. Prices for chemicals fell in tandem
with prices of upstream products, namely petroleum and
natural gas. The prices of benzene and ethylene, both petrochemicals, declined as crude oil prices dropped in price.
This decline in turn drove down prices for a wide range
of organic chemicals such as styrene, vinyl chloride, and
methyl tertiary-butyl ether. Plastics prices also underwent
a significant decline during the final 5 months of 2008,
falling by 13.9 percent. As they were for the prices of organic chemicals, declining crude oil prices were the largest
factor in the decline in prices for plastics.
Finished goods.  Prices for finished goods exports declined much more slowly during the final 5 months of
2008 than prices for agricultural and raw material exports.
Prices for capital goods declined 0.4 percent, with prices
for computers and semiconductors falling 3.9 percent.
Falling demand, which was brought about by the global
economic slowdown, was exacerbated by oversupply, especially of components such as DRAM and NAND flash
memory. In addition, technological innovations and competition kept manufacturing costs low and allowed for
prices to continually decline.
It was not until the final 2 months of the year that prices for automotive vehicles and parts declined, and they did
by only 0.2 percent. Prices for passenger cars and trucks
rose in the late summer months and through October,
when new (2009) vehicle models were introduced. After
the introduction of the new models, prices remained stable through the close of the year. Prices for parts, engines,
bodies, etc. began decreasing in November, falling 0.3
percent during the final 2 months of 2008. It took several
months for the falling prices of inputs, especially steel, to

have an impact on the prices of parts. Auto manufacturers cut back production as the economy slowed and credit
tightened, which dampened demand for vehicular parts.
Prices for consumer goods as a whole did not start to
decline until November, when they began their 0.8-percent slide for the final 2 months of 2008. A wide range of
factors contributed to falling prices for consumer goods.
A number of categories of nondurable consumer goods
such as pharmaceutical and medicinal materials along
with books and magazines began declining in July and
August as the U.S. dollar gained strength against the euro,
British pound, South African rand, and Canadian dollar.
Other consumer goods did not begin declining until November. Lower prices for materials finally began to drive
down prices for goods such as recreational equipment,
whose price declined 1.6 percent during the November–
December period.

Services and location of origin

Services.  Price trends for the services indexes were in line
with those of imports and exports for the first 7 months
of 2008. During the spring of 2008 and into the summer
months, prices steadily increased for both passenger fares
and freight rates. The price index for export air passenger
fares, a measure of passenger fares paid by residents of
foreign countries to United States carriers, increased 16.9
percent through the first 7 months of the year. The index
for export air freight, a measure of changes in the rates
charged for the transportation of freight from the United
States to foreign locations on U.S. carriers, increased 12.7
percent over the same period. Price increases were especially large in June and July. On the import side similar increases took place. The index for import air passenger fares,
a measurement of passenger fares paid by U.S. residents to
foreign carriers, increased 32 percent through the first 7
months of the year. The import air freight index, which
measures the changes in rates charged for the transportation of freight from foreign countries to the United States
on foreign carriers, increased by 14.7 percent. Rising fuel
prices brought about by the sharp increase in the price
for petroleum were responsible for a large part of the fare
and rate increases. Many airlines and carriers responded
to the higher price for jet fuel by increasing fares and add-

ing surcharges. The depreciation of the U.S. dollar also
contributed to rising prices.
As with the other export and import price measurements, import and export air passenger fares and freight
rates declined during the last few months of the year. Import air passenger fares and freight rates began declining in
August. The former fell 11.9 percent from August to December, while the latter fell 14.8 percent. Export prices for
the same services did not begin to decline until September
of 2008. During the final 4 months of the year export air
passenger fares declined 9.6 percent and import air freight
rates declined 5.7 percent. Declining fuel prices brought
about a reduction in passenger fares and freight rates along
with surcharges. A resurgence of the dollar over the final
5 months of the year also contributed to declining prices.
Location of origin.  The International Price Program publishes a set of import indexes known as location of origin
indexes, each of which is based on a country or region of
origin for goods and services. For a number of the locations the indexes are disaggregated by manufactured and
nonmanufactured goods. The rise and subsequent decline
of petroleum prices had a significant impact on the location of origin indexes of a number of countries and regions. Canada, Mexico, and the Asian Near East, more
commonly known as the Middle East, are the three major
sources for United States petroleum imports. The index
for each of the three locations underwent large increases
during the first 7 months of 2008 and then precipitous declines over the final 5 months. The most notable increase
and decrease occurred in the index for the Asian Near
East. From the beginning of the year through the month
of July, prices for imports from that region climbed 38.5
percent. Over the last 5 months of the year, those prices
declined by 55.2 percent. The Canadian index increased
22.1 percent during the first 7 months of the year and
then declined 25.2 percent during the final 5 months. The
location of origin index for Mexico increased 15.1 percent
before declining 18.1 percent. Even the location of origin
index for the United Kingdom, which exports a modest
amount of petroleum to the United States from its North
Sea fields, was affected by petroleum prices. During the
first 7 months of the year index rose 14.2 percent, only to
fall 17.9 percent over the final 5 months of the year.

Notes
For every calculation in this article involving change over time, the
base month is the month before the first month of the period that is referenced. In this example—in which change is measured over the first 7
1 

months of 2008—the first month used in the calculation is December
2007 and the last is July 2008. For changes over the entire year of 2008,
the change is calculated from December 2007 to December 2008.
Monthly Labor Review  •  April 2010  29

Import and Export Price Trends

See the Cushing, OK WTI spot price for July 3, 2008, at the U.S.
Energy Information Administration Web site: http://tonto.eia.doe.
gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=D
(visited Apr. 5, 2010).
2 

Stewart Bailey, “‘Tidal Wave’ in Commodities Rises to $400 Billion,” Bloomberg.com, Apr. 7, 2008, on the Internet at www.bloomberg.
com/apps/news?pid=20601081&refer=australia&sid=aq9xxwsBzf
6k (visited Apr. 5, 2010).
3 

Data on open-interest futures were obtained from the
Web site before the company was acquired by the CME group.
4 

NYMEX

See https://www.theice.com/marketdata/reportcenter/reports.
htm (visited Apr. 5, 2010) and choose “Historical Monthly Volumes”
for the category, “ICE Futures Europe” for the market, and “Historical
Volumes – ICE Futures Europe” for the report.
5 

Sam Fletcher, “Fundamentals don’t support $105 oil,” Oil & Gas
Journal, vol. 106, issue 11, March 2008.
6 

Christian Schmollinger, “Oil Rises to Record on Mexico Terminal Closures, China Demand,” Bloomberg.com, Apr. 15, 2008, on the
Internet at www.bloomberg.com/apps/news?pid=20601087&sid=a
TSlUOgUhCFs&refer=home (visited Apr. 7, 2010).
7 

World Oil Transit Chokepoints (Energy Information Administration, January 2008), on the Internet at www.eia.doe.gov/cabs/World_
Oil_Transit_Chokepoints/Full.html (visited Apr. 7, 2010).
8 

The World Factbook (Central Intelligence Agency, 2008). The current version of the Factbook is at https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html (visited Apr.
7, 2010).
9 

10 
Foreign Exchange Rates: Summary Measures of the Foreign Exchange Value of the Dollar (Federal Reserve), on the Internet at www.
federalreserve.gov/releases/h10/Summary/ (visited Apr. 7, 2010).

11 
Pablo Gorondi, “Supply concern, weak dollar put oil above $130
for first time,” USA Today, May 21, 2008, on the Internet at www.
usatoday.com/money/industries/energy/2008-05-21-oil-prices_N.
htm?csp=34&utm_source=feedburner&utm_medium=feed&utm_
campaign=Feed%3A+UsatodaycomMoney-TopStories+(Money++Top+Stories) (visited Apr. 7, 2010).

Natural Gas Year-In-Review 2008 (Energy Information Administration, April 2009), on the Internet at www.eia.doe.gov/pub/
oil_gas/natural_gas/feature_articles/2009/ngyir2008/ngyir2008.
html (visited Apr. 7, 2010).
12 

13 
Data on open-interest futures were obtained from the
Web site before the company was acquired by the CME group.

NYMEX

Danielle Rossingh, “Gold Gains in London as Fed Rate Cut
Speculation Spurs Buying,” Bloomberg.com, Mar. 10, 2008, on the Internet at www.bloomberg.com/apps/news?pid=20601082&sid=aIm
5clqvOQGU&refer=canada (visited Apr. 7, 2010).
14 

Micheal W. George, 2006 Minerals Yearbook: Platinum-Group
Metals (U.S. Geological Survey, September 2007), on the Internet at
http://minerals.usgs.gov/minerals/pubs/commodity/platinum/
myb1-2006-plati.pdf (visited Apr. 7, 2010).
15 

16 

Platts Metals Week, Mar. 17, 2008, pp. 5–6.

17 
“China accepts Vale’s iron ore price hike,” The Boston Globe,
Feb. 22, 2008, on the Internet at www.boston.com/business/articles/2008/02/22/china_agrees_to_vales_iron_ore_price/ (visited
Apr. 7, 2010).

30  Monthly Labor Review  •  April 2010

18 

Platts Metals Week, Apr. 28, 2008, p. 5.

“Fertilizer prices soaring in U.S.,” The Columbus Dispatch, Apr. 23,
2008.
19 

20 
Dan Caterinicchia, “Gasoline isn’t only rising cost for drivers,”
Associated Press, May 25, 2008.
21 
Seonjin Cha, “Hyundai Raises Car Prices in U.S. on Material
Costs,” Bloomberg.com, July 7, 2008, on the Internet at www.bloomberg.com/apps/news?pid=20601080&sid=adm5MneOGOwU&ref
er=asia (visited Apr. 7, 2010).
22 
Erica A. Taub, “Flat-Panel TV Prices Plummet,” The New York
Times, Dec. 2, 2008.

23 
Drake Lundell, “Speculation Caused High Corn Prices: Report,”
Ethanol & Biodiesel News, Oct. 28, 2008.
24 
“Corn: Futures Only Open Interest and Its Components,” (U.S.
Commodity Futures Trading Commission), on the Internet at www.
cftc.gov/OCE/WEB/Report%20Data/futures_Corn.html (visited
Apr. 7, 2010).

25 
“Midwest Floods Devastate Corn Crops, Could Raise Prices,”
Associated Press, June 14, 2008.
26 
Scott Kilman, “U.S. Lowers Its Corn Harvest Forecast 3.2%,
Prices Rise,” The Wall Street Journal, June 12, 2008.
27 
Jeff Wilson, “Soybeans Rise to Record as Floods Cut U.S. Acreage, Hurt Yields,” Bloomberg.com, July 1, 2008.

28 
David Bogoslaw, “U.S. Steelmakers’ Surprising Strength,” Business Week, Mar. 24, 2008, on the Internet at www.businessweek.com/
investor/content/mar2008/pi20080323_620307.htm (visited Apr. 9,
2010).
29 
“US steel exports surged in first half,” Metal Bulletin, July 25,
2008.
30 
Sam Fletcher, “Market fears drive down prices,” Oil & Gas Journal, vol. 106, issue 45, December 2008.

31 
“August 2008 Traffic Volume Trends” (U.S. Department of Transportation, Federal Highway Administration), on the Internet at www.
fhwa.dot.gov/ohim/tvtw/08augtvt/index.cfm (visited Apr. 9, 2010).

Tim Bowler, “Dollar and yen benefit in crisis,” BBC News, Oct.
27, 2008, on the Internet at http://news.bbc.co.uk/2/hi/7693020.stm
(visited Apr. 9, 2010).
32 

33 
“US dollar at 6-mth high as oil, gold decline,” Reuters, Aug.
12, 2008, on the Internet at http://uk.reuters.com/article/idUKSP34161820080812 (visited Apr. 9, 2010).

Millie Munshi, “Platinum Prices Fall to Lowest Since 2005; Palladium Drops 12%,” Bloomberg.com, Oct. 16, 2008.
34 

Platts Metals Week, “Surplus 125,000 mt in August – ICSG,” Nov.
24, 2008, p. 6.
35 

USDA Forecasts Robust Corn and Soybean Crops, Despite Flooding (United States Department of Agriculture), Aug. 12, 2008, on the
Internet at www.nass.usda.gov/Newsroom/2008/08_12_2008.asp
(visited Apr. 9, 2010).
36 

“U.S. corn tumbles nearly 4 pct to 10-month low,” Reuters, Oct.
6 2008.
37 

USDA Forecasts Robust Corn and Soybean Crops, Despite Flooding (United States Department of Agriculture), Aug. 12, 2008, on the
Internet at www.nass.usda.gov/Newsroom/2008/08_12_2008.asp
(visited Apr. 9, 2010).
38