New international price series published by nation and region

Monthly Labor Review, June, 1992 by Michelle Albert Vachris

Beginning in April 1992, the Bureau of Labor Statistics began separate publication of import price indexes for selected countries and regions that are important trading partners

The International Price Program of the Bureau of Labor Statistics recently began reporting quarterly U.S. import price indexes by country or region of origin. These indexes, first published with the April 30, 1992, release of first-quarter data, are available for the following countries and regions:'

* Developed countries

Manufactured goods

Nonmanufactured goods

* Developing countries

Manufactured goods

Nonmanufactured goods

* Canada

Manufactured goods

Nonmanufactured goods

* European Community

Manufactured goods

Nonmanufactured goods

* Japan

* Asian Newly Industrialized Countries (NIC's)

As shown in chart 1, Canada, the European Community, Japan, and the Asian NIC'S accounted for about 70 percent of total U.S. imports in 1985, the reference year for the dollar-volume weights used in calculating the indexes. The trade share for the developed countries was 65.4 percent, compared with 34.6 percent for the developing countries.

This article explains the background of the new series, and discusses their trends since fourth-quarter 1990---the first period for which estimates were developed--through first-quarter 1992. Because the methodology for the new series differs somewhat from that used to develop the Bureau's other international price series, it also is described briefly. The conclusion outlines plans for future expansion and modification of the new series.

Background of the new series

In 1982, the International Price Program began publishing an all-commodities import index, which represents imports from all U.S. trading partners. As the importance of foreign trade to the U.S. economy grew, so did interest in tracking price trends for imports by country of origin. Anecdotal evidence suggested that import price trends would vary by source country, especially for those product areas significantly affected by changes in currency exchange rates. Interest in analyzing these trends has become increasingly pronounced since 1985, when the U.S. dollar began depreciating against the currencies of the Nation's major trading partners.2

The average exchange rate indexes for detailed categories of imports, produced by the International Price Program since 1987,3 give further credence to the notion that price trends differ by country of origin. For example, during the period December 1990 through March 1992 (the same span covered by the new country or region of origin indexes), the import average exchange rate index for apparel was relatively flat, while the corresponding index for road vehicles and parts was more volatile. (See chart 2.) The difference between these two price series, while influenced by economic and environmental factors, is directly related to differences in country of origin. Apparel imports from the Asian NIC's (whose exchange rates tend to be pegged to the dollar) accounted for 39 percent of U.S. apparel imports in 1991. In contrast, 88 percent of U.S. imports of road vehicles and parts came from Canada, the European Community, and Japan, whose currencies float freely. To the extent that these data reflect exchange rates and other factors, the country of origin for the products is an important determinant of the different price trends.

In 1989, the International Price Program initiated a research project to determine the feasibility of producing country of origin import indexes from the program's import data base. This source consists of data on imported products that are sampled from the Consumption Entry Documents filed by importers with the U.S; Customs Bureau when products are imported to this country. The product universe is defined as all merchandise except that which is not consistently imported, such as works of art, military goods, and used items.

To support an index senes, one must be able to collect price information for a wide variety of products in each period. Thus, a major part of the feasibility study was to ascertain whether U.S. import trade with a country or region was consistent as to composition and volume over time. The list of countries and regions for which the new indexes are published was developed by analyzing the pattern of U.S. trade flows and the price data collected by the International Price Program. Estimates are published separately for Canada and Japan because it is relatively easy to obtain adequate import price data for these countries. In addition, regional indexes--currently, those for the Asian NIC's and the European Community--are published because estimates for these groupings of nations are important for analyzing U.S. import trade. It is not possible to publish indexes for individual countries within these regions because products traded often change country of origin between data reference periods; however, it is possible to maintain a consistent series for the region of origin over time.

Recent price trends