Mystery chart 1

This is the first in our series of mystery charts, where I give you a chart and you guess what it is. I’ll make it easy–multiple choice.

Here’s the chart:

Is this chart:

a) the real wages of production workers

b) the profits of tech companies

c) the price of imports from China (as reported by the BLS).

d) the price of homes in Illinois

Answer beneath the fold. No peeking!

Answer: c. The price of imports from China, as reported by the BLS.

Surprised? So was I. Basically, according to the BLS figures, the price index for imports from China is the same today as it was in 2003. This is a bit of a puzzle, considering that the major imports from china are information technology equipment, consumer electronics,  toys,  furniture, household items, and apparel–all goods which have fallen in price in the U.S. over this period, either a lot (in the case of electronics), or a little (in the case of apparel).

Moreover, it’s unlikely that Chinese imports to the U.S. would have risen so much over this period if the price of the imports had remained more or less constant.

The implication is that Chinese import prices probably dropped a lot more than this chart shows (for an explanation of biases in the import price numbers, take a look at this story.) In my next post, I will take a stab at estimating the macro implications of this statistical problem.

Comments

  1. But didn’t home prices in Illinois follow the same trajectory? Oh, well. China did unpeg a percentage of it’s currency from the dollar, and that could have driven the upswing. I remember thinking that I saw some upward price moves but it soon become too boring to follow — if it was even real it soon became almost imperceptible. There should have been a big transportation hit in that upswing time frame, too, but it didn’t seem obviously reflected in pricing. It is easy to imagine middle men absorbing the difference in order to keep volumes high, if they thought it was temporary. In groceries, it took a long time for suppliers to act on higher energy driven costs, but they eventually dropped the sizes of offerings. In hard goods, I don’t know what happened before the recession obscured it — I have wondered whether China took back their small currency concession without publicizing it.

  2. Looking at the chart, it occurs to me that the rise we see in the prices of Chinese goods beginning in roughly April 2007 would appear to closely coincide with the spike in oil prices, which occurred in the almost identical time interval, and which peaked in July-August 2008. The drawdown in the prices of Chinese goods following the peak would also seem to coincide with oil prices as well. Could that perhaps explain the changes we see in the price of imports from China?

    Here’s where I’m looking at oil price data:

    http://tonto.eia.doe.gov/cfapps/STEO_TableBuilder/index.cfm

  3. I guessed price of imports. 2008 was a big spike year for commodity prices. Currently Chinese exports are probably subsidised by easy credit.

  4. If you cart this price index along with an index of the yuan you see that it closely follows the yuan.

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