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Economy in Brief

U.S. Import Price Inflation Tame
by Tom Moeller September 17, 2007

Overall, August import prices fell 0.3% last month. The decline was led by a 1.3% drop in petroleum prices. Consensus expectations had been for a 0.2% increase. A reversal in that decline is likely for the September figures. Already in September, prices for Brent crude oil have averaged $75.76 versus an August average of $70.80 and on Friday were $76.99.

Less petroleum, however import price inflation was also tame last month and posted a 0.1% decline. The decline was the first since January. It followed a bit of strength in 2Q when prices posted an average monthly increase of 0.9%.

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 reduced 47% against a broader basket of currencies.

Against a broad basket of major currencies, the dollar this year is down roughly 6% since yearend '06 and it's down roughly 10% from the high during 2005.Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available here.

Lower prices for industrial supplies & materials excluding petroleum accounted for the decline in nonpetroleum prices last month with a 1.0% (+6.0% y/y) decline. Lower prices for chemicals (+3.8% y/y) led the m/m decline. Building materials prices also fell m/m (+0.8% y/y) as did . The detailed import price series can be found in the Haver USINT database.

Prices for nonauto consumer goods rose 0.2% (1.4% y/y) and apparel prices were unchanged m/m (0.6% y/y) after showing some strength early in the year.Capital goods prices rose 0.2% (0.4% y/y) for the fourth consecutive month. Prices for computers, peripheral and semiconductors rose 0.2% (-5.1% y/y). Less the high tech sector, capital goods prices rose 0.2% (2.8% y/y).

Overall export prices rose 0.2% and gains continued to decelerate. Enough to drop the y/y increase to 3.6% y/y from a high of 5.4% in February. Agricultural prices fell 1.0% (17.6% y/y) and nonagricultural export prices rose 0.1% (2.4% y/y).

Import/Export Prices (NSA) August July Y/Y 2006 2005 2004
Import - All Commodities -0.3% 1.3% 1.9% 4.9% 7.5% 5.6%
  Petroleum -1.3% 6.4% 1.5% 20.6% 37.6% 30.5%
  Non-petroleum -0.1% 0.1% 2.3% 1.7% 2.7% 2.6%
Export- All Commodities -0.1% 0.2% 3.6% 3.6% 3.2% 3.9%
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