Softer Prices on Imported Goods Should Provide Relief to Consumers
By Rom Badilla, CFA
September 13, 2012
Wednesday’s data release shows that prices for imported goods grew less than anticipated which signals favorable core inflation levels for the U.S. economy. The Bureau of Labor Statistics released a report showing that import prices grew by 0.7% in August after coming in at -0.7% in the previous month. The gain was the first positive print since March of 2012 when the Import Price index improved by 1.4%. Despite the rebound, the August print fell short of expectations since the median forecast by economists was at 1.5%.
The headline number was mostly driven by a surge in petroleum prices which increased by 4.1%. As a result, higher energy price gains will be the focus in the upcoming Producer Price and Consumer Price Indices releases slated for later this week. For all imported goods ex petroleum, prices actually declined in August by -0.2%. The decline in non-petroleum prices were highlighted by declines in food and beverages and consumer goods which fell by 0.9% and 0.3%, respectively.
Easing price pressures in imported food and beverages is a positive development for U.S. consumers according to Barclay’s economist, Peter Newland. In his latest “Economics Research – Instant Insights” report, he wrote that the trend in prices on food and beverages which has fallen in the past four months, “suggests that imported food prices will provide some offset to gains in domestic food prices on the back of the drought in the Midwest over the summer.”
While imported goods prices increased this past month, the fact remains that prices have been falling and the lack of price pressures abroad should remain. On a year over year basis, total import prices are now down 2.2% and after excluding petroleum prices, import prices are lower by 0.9% over the past year.
Visit Bondsquawk on Facebook!
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.