Lower Energy Prices Give Temporary Relief to Import Price Increases

Import prices dipped -.3% MoM (consensus +.2%) in August, as energy prices dropped. This marks the first monthly decline in import prices since January. Unfortunately, this improvement is likely to be short lived, based on the recent record oil prices and rapidly deteriorating dollar. July's gain was also revised down to +1.3% from the originally reported +1.5% MoM gain. On a year-over-year basis, import prices eased substantially to +1.9% in August from +2.8% in July. When oil products are excluded, import prices rose +2.3% YoY.

Both petroleum and natural gas costs fell in August. Excluding oil and natural gas price declines, import prices rose +.2% MoM, showing the general impact of the weaker dollar. Natural gas prices saw their largest monthly decline since January, falling -13% MoM. Food prices continue to rise, increasing +.7% MoM (+8% YoY). Imported capital goods prices have risen for four straight months, and have increased +.4% YoY. Imported auto prices rose +.2% MoM for the largest gain in almost a year.

The decline in the dollar is not all negative, it is making U.S. goods more competitive in international markets, which increases export demand. But, the combined impact is inflationary for the U.S.

Import prices from Canada fell -.5% MoM due to the lower energy prices, but were unchanged with Japan, and rose +.3% MoM with China. Price increases from China have been strong for many months, causing the annual increase to rise to +1.1% YoY. Rising import prices from Asia are larger than those seen with Europe and Latin America.

U.S. export prices rose +.2% MoM due to a 1% rise in farm export prices, as the shortage of grain stockpiles raises worldwide demand for foodstocks.