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Economy in Brief

U.S. Import Price Rise Strong
by Tom Moeller February 15, 2008

Overall import prices during January rose a strong 1.7%. The rise, which was three times expectations, followed the December respite when temporarily lower oil prices produced a revised 0.2% decline initially reported as no change. Consensus expectations had been for a 0.5% rise in January prices.

Petroleum prices jumped 5.5% after a 1.9% decline to close out last year. Crude petroleum prices surged 4.5% (69.7% y/y) after December's 1.3% decline. That strength was exceeded by a 10.2% (73.7% y/y) jump in fuel oil prices and an 8.1% (44.2% y/y) rise in other petroleum product prices.

Less petroleum, import prices rose 0.6% after a 0.3% December increase. The latest m/m rise was near the strongest since November 2006.

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 petroleum surged 2.2% (10.1% y/y) led by strength in paper prices and a 9.7% (21.1% y/y) blowout in chemical prices. The detailed import price series can be found in the Haver USINT database.

Capital goods import prices fell 0.2% (+0.5% y/y) as prices of computers, peripheral and semiconductors declined again, last month by 1.4% (-5.4% y/y). Less the high tech sector, January capital goods prices rose a modest 0.2% (3.0% y/y) though that rate of gain has accelerated from 2.7% growth last year and 1.4% during 2006.

Prices for imports of nonauto consumer goods rose 0.3% (1.6% y/y) and that y/y rise in prices has been stable since early last year. Apparel prices rose 0.3% (1.9% y/y). These prices had been unchanged or declining through 2004 to 2006. Prices for household goods rose 0.4% (1.5% y/y), a y/y change that has been fairly stable.

Overall export prices surged 1.2% due to a 5.0% (28.9% y/y) rise in agricultural prices. Prices for nonagricultural goods also rose a relatively strong 0.8% (4.8% y/y).

Some Simple Tests of the Globalization and Inflation Hypothesis from the Federal Reserve Board can be found here.

Import/Export Prices (NSA) January December Y/Y 2007 2006 2005
Import - All Commodities 1.7% -0.2% 13.7% 4.2% 4.9% 7.5%
  Petroleum 5.5% -1.9% 66.9% 11.5% 20.6% 37.6%
  Non-petroleum 0.6% 0.3% 3.6% 2.7% 1.7% 2.7%
Export- All Commodities 1.2% 0.4% 6.7% 4.9% 3.6% 3.2%
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