Higher petroleum prices fueled a 1.1% jump in overall import prices last month which was about double Consensus expectations for a 0.6% gain.

The increase occurred as petroleum import prices surged 4.8% in December after sharp declines during the prior three months. So far in January the price of WTI crude oil has fallen roughly six dollars (-10%) from the $62.03 per bbl. averaged in December and yesterday's price was down ten dollars to $51.89.

Less petroleum import prices rose 0.4% in December and the prior month's increase was revised up to 0.9% from 0.7%. 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.

Prices for nonoil industrial supplies & materials surged 1.5% (4.5% y/y) after a 4.0% November spike. Prices for nondurable industrial supplies less petroleum rose 2.6% (-5.8% y/y) after an upwardly revised 8.9% November jump. Prices for durable industrial supplies & materials rose 0.7% (14.7% y/y).

Capital goods prices ticked up 0.1% (0.4% y/y) and excluding a 0.1% (-3.6% y/y) decline in computers, capital goods prices rose 0.2% (2.2% y/y) in December. Prices for nonauto consumer goods rose 0.2% (1.2% y/y).

Export prices rose 0.7% as agricultural export prices surged 2.2% (13.2% y/y) but nonagricultural export prices rose 0.5% (3.8% y/y).

The Adjustment of Global External Imbalances: Does Partial Exchange Rate Pass-through to Trade Prices Matter? from the Federal Reserve Board is available here.

The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York can be found here.