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April, 1986, Vol. 109, No. 4
Import, export prices reflect
declining dollar and oversupply in 1985
U.S. import prices, as measured by the BLS International Price Program, continued to fall in 1985, marking their third consecutive year of decline. The 1.1-percent decrease for the year followed a 1.5-percent drop in 1984. Most of the 1985 decline was registered in the first quarter, when import prices fell 2.3-percent. The dollar's depreciation moderated import price decreases in the second and third quarters, and contributed to a 1.8-percent price rise for imports during the fourth quarter. (See chart 1.)
During 1985, price increases for imports of finished goods and food could not offset declines for raw materials and intermediate goods. Prices rose 4.2 percent for machinery and transport equipment, 0.8 percent for miscellaneous manufactured goods, and 4.8 percent for food. Prices for beverages and tobacco also rose 3.3 percent for the year. However, decreases were recorded in the other four components of the all-import price index. Energy, intermediate goods, and crude material prices were down 6.0 percent, 2.5 percent, and 7.8 percent, respectively. The fats and oils index, which represents only 0.2 percent of the all-import index, plunged 56.0 percent. These declines are largely attributable to oversupplies of basic commodities, such as crude petroleum, rubber, steel, and certain nonferrous metals.
The U.S. dollar reached an all-time high in March 1985, and then began a gradual decline, falling 9 percent by September. In late September, the decline was accelerated after a group of the Nation's major trading partners agreed to intervene in the foreign exchange market to curb the dollar's strength. The immediate effect was a further 5.1-percent decline in the value of the dollar, bringing the total drop to 13.6 percent for the year.1
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1 Exchange rate indicated is the real trade-weighted exchange rate. See World Financial Markets (New York, Morgan Guaranty Trust Company, International Economics Department), December 1985, p. 4.
Related BLS programs
International Price Indexes
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