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Economy in Brief

U.S. Total Import Prices Surged Again
by Tom Moeller July 11, 2008

U.S. import price overall jumped another 2.6% last month. That was little changed from the gains in each of the prior three months and it exceeded the expected 2.0% increase. During the last three months import prices have risen at a 37.6% annual rate which was near the quickest since late-1990.

The rise was led by the strength in petroleum prices which jumped another 7.4% and the three-month rate of increase amounted to 154%. Imported crude petroleum prices in July are about even with June .

Less petroleum, import prices rose 0.9% after a 0.7% gain during May, again pushed higher by the lower foreign exchange value of the dollar. The 12.4% rate of price increase during the last three months is near the fastest on record.

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.

Prices for industrial supplies & materials excluding oil surged another 3.4% in June and the three-month rate of increase ballooned to 41.0% (AR).. There has been great strength in finished metal, chemicals and agricultural prices. The detailed import price series can be found in the Haver USINT database.

Capital goods import prices rose 0.3% and the three month rate of gain of 2.8% is double last year's rate of increase. Less the lower prices of computers, capital goods prices have been rising at an 8.0% rate during the last three months. They rose 2.7% last year. Prices of computers, peripherals and accessories have fallen at a 4.9% rate this year after the 5.1% 2007 decline.

Finally, prices for nonauto consumer goods imports rose 0.2% in June but they have risen at a 5.1% in 2008 after the 1.6% increase last year. This year's gain in prices is the quickest since 1992 and has been notable for durables (5.7%).

Total export prices surged 1.0% as agricultural prices jumped 2.2% (33.0% y/y). Nonagricultural export prices also have been strong and they rose in June by 0.9% (6.4% y/y).

What Is the Optimal Inflation Rate? from the Federal Reserve Bank of Kansas City can be found here.

Import/Export Prices (NSA) June May Y/Y 2007 2006 2005
Import - All Commodities 2.6% 2.6% 20.5% 4.2% 4.9% 7.5%
  Petroleum 7.4% 8.9% 78.6% 11.6% 20.6% 37.6%
  Non-petroleum 0.9% 0.7% 7.3% 2.7% 1.7% 2.7%
Export- All Commodities 1.0% 0.4% 8.6% 4.9% 3.6% 3.2%
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