Global| Oct 11 2007U.S. Import Price Deflation Ended by Lower Dollar
by:Tom Moeller
|in:Economy in Brief
Summary
U.S. September import prices jumped 5.4% as petroleum prices surged. Consensus expectations had been for a 1.0% increase. Some stabilization of that upward pressure seems likely for October since so far in the month, Brent crude oil [...]
U.S. September import prices jumped 5.4% as petroleum prices surged. Consensus expectations had been for a 1.0% increase.
Some stabilization of that upward pressure seems likely for October since so far in the month, Brent crude oil prices have averaged $77.71 per barrel versus an average of $77.02 last month.
Less petroleum, import price inflation seemed tame posting a 0.2% decline after 0.1% dip in September.
The lower dollar, down by nearly one third since early 2002, may nevertheless be having an 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.
The effect of the lower dollar can be seen in the turnaround in capital goods prices. Less the high tech sector, where prices continue to fall, capital goods prices rose 2.9% y/y in September, an acceleration from the less than one percent gains early last year. Consumer goods prices were rising at a 1.5% y/y rate in September versus a modest deflation of prices as recently as early 2006. Inflation of motor vehicle & parts prices also has picked up to 1.1% from 0.2% early last year.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 indeed fell 1.4% (+3.6% y/y) as inflation of chemical prices (+3.4% y/y) and iron & steel mill products was under control. In fact, prices for most metal products has decelerated with the downturn in the U.S. housing market. The detailed import price series can be found in the Haver USINT database.
Overall export prices rose 0.3% and annual increases of roughly 4% have been stable for at least the last year. Prices for agricultural products surged 4.1% (23.3% y/y) but nonagricultural export prices were unchanged (2.9% y/y).
A Falling Dollar: Good News or Bad News? from the Federal Reserve Bank of Atlanta can be found here.
| Import/Export Prices (NSA) | September | August | Y/Y | 2006 | 2005 | 2004 |
|---|---|---|---|---|---|---|
| Import - All Commodities | 1.0% | -0.3% | 5.2% | 4.9% | 7.5% | 5.6% |
| Petroleum | 5.4% | -1.1% | 20.1% | 20.6% | 37.6% | 30.5% |
| Non-petroleum | -0.2% | -0.1% | 2.0% | 1.7% | 2.7% | 2.6% |
| Export- All Commodities | 0.3% | 0.2% | 4.5% | 3.6% | 3.2% | 3.9% |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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