Imported Price Inflation Up

Import prices rose 0.8% last month and about matched Consensus expectations for a 0.7% rise. The prior month's increase was revised down slightly due to a lessened gain in petroleum prices but the estimated rise in nonpetroleum prices was revised higher.

Petroleum prices jumped 3.9% on top of the 3.4% surge the prior month. So far in March the price of Brent Crude oil has averaged $52.15 per barrel, up 14.2% versus the $45.66 averaged last month.

Other than oil, import prices continued to move moderately higher. Prices for nonauto consumer goods rose 0.2% (1.0% y/y) though prices in most categories were little changed. Capital goods prices also were unchanged m/m (-0.6% y/y) but lower computer prices (-0.4% m/m, -6.8% y/y) accounted for most of the weakness. Excluding computers capital goods prices rose 0.2% (2.5% y/y) and contrasted with price deflation in excess of 2% early in 2002.

Export prices were unchanged last month as a 0.9% decline (-8.2% y/y) in agricultural prices offset a 0.1% (4.7% y/y) gain in nonagricultural export prices.

Exchange Rates and the Prices of Manufacturing Products Imported into the United States is a 2002 article from the Federal Reserve Bank of New England.

The preliminary March reading of consumer sentiment from the University of Michigan fell to 92.9. The 1.3% m/m fall was similar to the declines logged during the prior two months. Consensus expectations had been for a slight rise to 94.8. During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.

The reading of current conditions fell for the second month. The 1.7% decline was led by a 6.0% drop (-7.3% y/y) in the sentiment of families earning more than $50,000 per year. Sentiment in families earning less than $50,000 per year rose 7.0% (0.8% y/y).

Consumer expectations slipped 0.9% (-5.9% y/y) for the third consecutive monthly decline as the expected change in real income fell 4.7% (-8.0% y/y).

The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

Reexamining the Consumption-Wealth Relationship: The Role of Uncertainty from the Federal Reserve Bank of New York is Available here.

Italy's merchandise trade accounts have turned to a deficit position, with the total balance for 2004 in deficit for the first time since 1992. In January, reported today by Italy's National Institute of Statistics, the deficit was €554 million, seasonally adjusted, nearly the same as December's €609 million. Exports eased €168 million, while imports were off €223 million. Longer trends in exports and imports indicate that adverse developments on both sides of the trade accounts generated the deficit.

Exports drifted downward from late 2001 until early last spring. This slack was reflected in shipments to customers elsewhere in the EU and also to non-EU areas; see the accompanying graph. By type of product, all three major categories were flat: consumer goods, investment goods and intermediate products. The latter two have rebounded in recent months, while consumer goods exports remain sluggish.

Imports didn't expand in that 2001-2003 period, but they did stay steady as exports declined, and they have run up rapidly since last April. The surge in energy prices is an obvious driver of this growth, but notably, consumer, investment and intermediate goods categories have all participated, nearly equally. It will be interesting in coming months to see if the continuing pressure on energy prices will eventually eat into demand for other goods and services, in Italy, but also among Italy's trading partners.