U.S. import prices during October surged 1.8%, the largest one month gain since May of last year, as petroleum prices jumped. Consensus expectations had been for a 1.1% increase.

Prices of petroleum products rose jumped 6.9% as Brent crude oil prices rose 7.4% to an average $82.70 per barrel.

Less petroleum, the 0.5% gain in import prices was the largest one month gain since May and the y/y gain in prices of 3.2% was the fastest since the end of 2005.

The lower dollar is having its effect in raising import prices. 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.

So far, the dollar's effect has been moderate but it has led to a turnaround in pricing pressure. Capital goods prices less the high tech sector rose 0.2% in October (2.9% y/y) but that y/y gain is an acceleration from the 1.4% rise during all of 2006. Consumer goods prices rose 0.1% for the third straight month, but again, the y/y rise of 1.4% is up from the 0.4% 2006 increase. Imported motor vehicle & parts prices rose 0.4% producing a y/y gain of 1.2%, double last year's gain.

Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available here.

Prices for industrial supplies & materials excluding petroleum surged 1.5% after three months of decline, lifting the y/y change to 8.9% and continuing the strength of the last several years. The detailed import price series can be found in the Haver USINT database.

Overall export prices increased 0.9%. Prices for agricultural products jumped another 3.9% (26.8% y/y) and nonagricultural export prices rose 0.5% (3.9% y/y), roughly equal to the annual gains during the last three years.

A Falling Dollar: Good News or Bad News? from the Federal Reserve Bank of Atlanta can be found here.