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Economy in Brief

U.S. Import Prices Are Stable As Oil Costs Slip
by Tom Moeller January 14, 2010

The yearend weakness in oil prices was modest but enough to hold overall monthly import prices stable. The zero change in December import prices matched Consensus expectations. For the year as whole, however, the picture was more dramatic. Import prices fell 11.5% in 2009 and that reversed the 2008 increase. Excluding petroleum, import prices fell 4.1% last year and reversed most of the 2008 increase.

Petroleum prices slipped 2.0% last month following their 6.3% November increase. For the year overall, the decline in prices reversed the climb in 2008. That pattern masks, however, extreme volatility during the year. By yearend, petroleum prices had nearly doubled the January trough. This month, Brent crude oil prices have strengthened further to nearly $80 per barrel from a low just above $71 last month.

In addition, the latest report from the U.S. Bureau of Labor Statistics indicated that non-oil import prices rose 0.5% after a similar gain during November. The lower value of the dollar has now helped lift these prices at a 6.8% annual rate during the last three months, reversing a 7.3% y/y decline as of July. (During the last ten years, there has been a negative 81% 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.)

Excluding petroleum, last year prices reversed most of the 2008 increase and the decline breaks down as follows: Prices for iron & steel mill products fell 28.5% and reversed all the 2008 increase. Chemical prices fell 12.4% after a 24.0% 2008 increase. Food & beverage prices slipped 2.8% after a double-digit 2008 gain. Prices for nonauto consumer goods were weak and slipped 0.3% after a 2.8% increase. That decline reflected a 0.6% decline in durable consumer goods prices which reversed strong gains in the prior two years. Home entertainment equipment prices fell 4.1% last year and extended a decline dating back to 1996. Furniture prices nudged up 0.6% after a 7.1% 2008 increase. Finally, apparel prices slipped 0.1% after strong gains in 2007 and 2008. 

Total export prices fell 4.6% last year following strong gains dating back to 2003. The decline reflected a 12.8% drop in agricultural export prices and a 3.7% drop in "non-ag" prices. These declines reversed just some of the strength through 2008.

The import and export price series can be found in Haver's USECON database. Detailed figures are available in the USINT database.

Risks to Sustained Economic Recovery (With Lessons Learned from Winston Churchill and Teddy Roosevelt) from the Federal Reserve Bank of Dallas can be found here

Import/Export Prices (NSA, %) December November October Y/Y 2009 2008 2007
Import - All Commodities 0.0 1.6 0.9 8.6 -11.5 11.5 4.2
  Petroleum -2.0 6.3 2.4 78.4 -35.9 37.7 11.6
  Nonpetroleum 0.5 0.6 0.5 -0.2 -4.1 5.3 2.7
Export - All Commodities 0.6 0.9 0.0 3.4 -4.6 6.0 4.9
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