Highlights
Deflation is definitely here, evidenced by a string of declines in consumer and producer prices and a string of declines in import & export prices. Import prices fell 4.2 percent in December reflecting another gigantic month-to-month decline, this time 21.4 percent, in prices of petroleum imports. But excluding petroleum -- and this is the key reading in the report -- import prices fell 1.1 percent in December, this follows a 1.8 percent decline in November, a 0.8 percent decline in October, and a 1.0 percent decline in September. Demand for imports has collapsed, evidenced by yesterday's international trade report, and foreign companies are lowering their prices as a result.

Export prices fell 2.3 percent in December with prices of agricultural exports down 6.5 percent. Export prices for non-agricultural exports, a reading with similar underlying importance as non-petroleum import prices, fell 1.9 percent in the month.

The wild boom and bust economic ride of 2008 is reflected in year-on-year rates which are declining but, at least for now, showing less deflationary pressure than the month-on-month readings. Year-on-year non-petroleum import prices are still positive at 0.9 percent though when including petroleum the rate is a negative 9.3 percent. Total year-on-year export prices are down 3.2 percent. Today's results point to further declines in producer and consumer price reports later this week and are certain to be a major topic of concern for businesses and policy makers across the world.

Market Consensus Before Announcement
Import prices in November fell 6.7 percent after dropping 5.6 percent in October. However, the worst weakness was tied to commodities prices - which are very sensitive to both changes in demand and supply. Nonetheless, the latest decline was a record monthly decline for the series. Another record was the month-to-month decrease in import prices excluding petroleum, down 1.8 percent after a 0.9 percent dip in October. We will likely see another decline in import prices in December on lower oil and other commodity prices. But with weakening demand, consumer and capital goods prices could also dip.

Import prices Consensus Forecast for December 08: -5.3 percent
Range: -8.5 to -2.1 percent

2009 Release Schedule

Released On: 1/14 2/18 3/13 4/9 5/13 6/12 7/10 8/13 9/11 10/14 11/13 12/11 Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov