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Economy in Brief

Import Prices Fell Broadly
by Tom Moeller December 14, 2005

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).

Import/Export Prices (NSA) Nov Oct Y/Y 2004 2003 2002
Import - All Commodities -1.7% 0.3% 7.0% 5.6% 2.9% -2.5%
  Petroleum -8.0% -1.0% 30.8% 30.5% 21.0% 3.0%
  Non-petroleum -0.2% 0.9% 2.6% 2.6% 1.1% -2.4%
Export - All Commodities -0.9% 0.7% 2.4% 3.9% 1.6% -1.0%
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