·
The 1.7% decline in import prices last month was three times
expectations for a 0.5% drop. The main source of last month's price
weakness was an 8.0% drop in petroleum prices. Crude oil prices fell
6.2% and "other" petroleum prices fell 26.2%.
· Last month's surprise, however, was that excluding petroleum prices fell 0.2% after two months of 0.9% gain. Prices for nonauto consumer goods fell 0.2% (+0.8% y/y) and capital goods prices were unchanged (-0.7% y/y). Excluding another decline in computer prices, capital goods prices also were unchanged (+1.9% y/y).
· During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
· Export prices also were weak. The 0.9% drop was due to a 0.2% (-0.7% y/y) decline in capital goods prices and no change in nonauto consumer goods prices (0.8% y/y).