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.