What Are the Import and Export Price Indexes (MXP)?

The import and export price indexes (MXP) measure changes in the prices of goods and services coming in and out of the United States. The indexes are updated once a month and are produced by the Bureau of Labor Statistics' (BLS) International Price Program (IPP).

Key Takeaways

  • The import and export price indexes (MXP) measure changes in the prices of goods or services purchased from abroad by U.S. residents (imports) and sold to foreign buyers by U.S. residents (exports). 
  • The indexes are updated once a month by the Bureau of Labor Statistics' (BLS) International Price Program (IPP).
  • The data is used to deflate government trade statistics, predict future inflation and prices changes, set fiscal and monetary policy, measure exchange rates, negotiate trade contracts, and identify specific industry and global price trends. 
  • Investors pay careful attention to price trends because inflation, the rising cost of goods, is generally bad for both bond and equity markets.

How Import and Export Price Indexes (MXP) Work

The import and export prices indexes (MXP) are created by compiling the prices of goods purchased in the U.S. but produced outside of the country (imports), and the prices of goods purchased outside of the country but produced in the U.S. (exports).

The BLS defines its indexes as "containing data on changes in the prices of non-military goods and services traded between the U.S. and the rest of the world." These measures, it adds: "show how prices of a market basket of goods and services in international trade change from one period to the next."

Not all U.S. international trade is conducted in U.S. dollars (USD). The BLS says 6% of imports and exports currently surveyed are priced in foreign currencies. For its indexes, all prices are converted to the local currency, using an average exchange rate from the month prior to the pricing month.

Import and export price changes from the previous month are usually published by the middle of the following one.

Benefits of Import and Export Price Indexes (MXP)

The import and export price indexes (MXP) serve many purposes. Among other things, they can be used to:

Important

The import and export indexes (MXP) are one of three major measures of change in the prices of goods and services in the U.S. economy. The others are the consumer price index (CPI) and producer price index (PPI).

Data from these indexes often has a direct impact on bond markets. The indexes are used to help measure inflation in products that are traded globally. Bond prices will often decrease when importing inflation becomes too high because it erodes the value of the original investment.

Inflation can also hurt equity markets. As inflation increases, interest rates are often raised to help curtail rising prices. Higher interest rates make it more expensive to borrow money and encourage consumers to save their money. Often, the upshot is falling stock prices.

In June 2019, prices for foreign-made goods imported to the U.S fell by their steepest margin in six months, driven by lower oil prices, an uncertain global economic outlook and U.S.-China trade tensions.

Limitations of Import and Export Price Indexes (MXP)

According to Walter J. Wendells, an economics professor at North Carolina State, there are two major weaknesses to price indexes.

The first is that they do not always fully account for changes in quality. Prices may rise or fall, but the price indexes sometimes fail to indicate whether these fluctuations are reflective of a higher or lower quality product. That might render the fluctuations irrelevant, or at the very least, less relevant in measuring whether or not the cost of living has increased or decreased.

The second is that some indexes ignore, or fail to account for, changes in consumption patterns. If the price of something goes up due to the law of demand, consumers buy less of those goods. In this way, "consumers partially offset some of the impact of higher prices on their cost of living."