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Economy in Brief

The small table below is the capsule summary of export and import prices. We prefer to look at nonagricultural export prices and nonpetroleum import prices since these correspond best to the core domestic inflation measures we follow most closely. Nonpetroleum import prices rose by a bit uncomfortable 0.3% in March while nonagricultural export prices rose by a sharp 0.6%. In the month, both the agricultural export and petroleum import prices surged. Still nonpetroleum import prices do NOT show an accelerating inflation trend but nonagricultural export prices do so.
SAAR All Petrol Excl Petrol SAAR All Agriculture Non-Agricultural
3-MO 2.5% -8.9% 1.1% 3-MO 7.7% 24.7% 6.7%
6-MO -0.7% -41.2% 2.3% 6-MO 5.3% 30.3% 3.5%
Yr/Yr 2.8% -5.5% 2.9% Yr/Yr 5.3% 20.2% 4.2%
2-Yrs 3.6% 14.5% 1.9% 2-Yrs 3.8% 10.0% 3.3%
MO/MO 1.7% 9.0% 0.3% MO/MO 0.7% 2.1% 0.6%
The more detailed ‘end use’ categories reveal that the inflation that pertains to imported consumer goods in the month was just 0.2% and the trend there is fairly flat. Motor vehicle prices rose by 0.1% and they have a lower trajectory and still flat trend as well. Imported capital goods prices have fallen for two months in a row and trends there are working lower. Food prices are up, explaining some of the strength in nonoil import prices. Export prices are quite strong even excluding foods/agricultural products. Nonagricultural export prices are up by 4.2% yr/yr and by 6.7% over three months (SAAR). Some of this is industrial supplies and materials where oil prices reside and the US does have some oil exports. But food prices and industrial supplies show the bulk of the pricing pressure on sales abroad. Capital goods prices are weak, as they are for imports, but trends are a bit firmer for export prices.
Export and Import Prices
IMPORTS Mar-07 Feb-07 Jan-07 3-MO 6-MO 12-MO
ALL Imports 1.7% 0.1% -1.1% 2.5% -0.7% 2.8%
Excl Petrol 0.3% 0.1% -0.1% 1.1% 2.3% 2.9%
Petrol 9.0% 0.6% -6.6% 10.2% -11.8% 2.4%
Foods Feeds and Beverages -0.1% 0.2% 1.5% 6.7% 6.2% 6.5%
Industrial Supplies 5.0% 0.4% -3.7% 6.1% -3.6% 5.4%
Capital Goods -0.1% -0.2% 0.0% -1.3% -0.2% 0.1%
Motor Vehicles & Parts 0.1% 0.2% 0.0% 1.2% 1.0% 1.1%
Consumer Goods excl Autos 0.2% 0.0% 0.2% 1.6% 1.8% 1.8%
EXPORTS Mar-07 Feb-07 Jan-07 3-MO 6-MO 12-MO
ALL Exports 0.7% 0.7% 0.4% 7.7% 5.3% 5.3%
Agriculture 2.1% 2.8% 0.7% 24.7% 30.3% 20.2%
Non Agricultural 0.6% 0.5% 0.5% 6.7% 3.5% 4.2%
Foods Feeds and Beverages 2.3% 3.3% 0.2% 25.8% 30.1% 20.7%
Industrial Supplies 1.9% 1.9% 0.6% 19.0% 8.9% 10.9%
Capital Goods 0.0% -0.1% 0.3% 0.8% 1.0% 0.8%
Motor Vehicles & Parts 0.1% 0.1% 0.2% 1.5% 1.3% 1.4%

Our approximations of core export and core import prices taken as ratios to core domestic goods prices show that international prices are rising faster than domestic price counterparts, imparting some inflation impulse to the US. For these calculations we use core consumer goods prices to compare to nonoil imports and core PPI prices for nonagricultural exports.  It is difficult to get a precise match but these results are suggestive of some upward pressure.

In terms of discerning an inflation impact to the domestic price level the final link is the exchange rate. Here we see a collection of currencies. The dollar is weaker since early 2002 to varying degrees against all these currencies. But the dollar’s drop versus the euro has slowed since late 2004 and from that same point the dollar has actually risen versus the yen. The dollars drop versus other Asian currencies has slowed since then as well, except for the yuan, for which the downward creep began in early 2005. On balance a weaker dollar risks importing inflation as the dollar fall causes foreign prices to rise when translated into domestic currency units when they become imports. For example, if the euro rises by 10% all things priced in euros will tend to rise by 10% depending on the sellers pricing policy. Firms that cut euro prices to damp dollar prices also shave profits in order to retain market share. There comes a point where such shaving ceases to makes sense. A weaker dollar also affords US producers an opportunity to hike dollar prices (somewhat) and still improve their competitiveness versus foreign-based sellers abroad. We see some but scant evidence of this in export prices but foods and industrial supplies and materials are seeing the most of the export price increases and these categories are driven by the pricing of commodities where there is often little discretion.  On balance export and import prices are not a great threat to inflation in the US. But at the moment and given currency market trends they appear to be at least a slight impediment to price stability.
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