Import Price Gains Set New Annual Record

Import prices in January leaped higher. After falling a revised -.2% MoM in December, prices jumped +1.7% MoM in January (consensus +0.5%). Most of the rise was due to oil, excluding petroleum, prices rose a more modest +.6% MoM. On an annual basis, import prices spiked to another new record high of +13.7% YoY against data going back to 1982. Consensus had looked for an annual gain of 12.7% following the revised lower YoY increase of 10.4% in December. Petroleum prices rose +5.5% MoM in January, and are up +67% YoY. Crude oil prices reached a record $100 a barrel in January. Excluding all fuels, import prices rose +0.7% MoM and +3.3% YoY, so it is clear that higher energy prices have been the main driver of higher import prices over the past year. The next largest contributor to rising import prices are industrial supplies which rose +4% MoM and are up +36.8% YoY. Food and beverage costs have also been rising, increasing +3.1% MoM and 10.9% YoY. Capital goods import prices actually fell -.2% MoM, the first decrease in nine months, and are only up +0.5% YoY. Autos and consumer goods prices have been very tame, with both rising less than 2% YoY. Import prices from Canada, our largest trading partner, have risen +11.3% YoY, representing the large energy component of the imports. Non-manufactured goods prices for Canadian goods rose +31.4% YoY after the Canadian currency rose to multi-decade highs last year. Chinese goods rose +.8% MoM and are up +3.3% YoY, the largest increase since records began in 2004. European Union exports have risen +4.1% YoY, with the +1.1% monthly increase in January the largest in over a year. Latin American prices rose +3.6% MoM and +24.7% YoY. Brazil's Real was one of the best performing world currencies in 2007. Obviously rising import prices create an inflation risk for the U.S., and cut into the purchasing power of U.S. consumers. The dollar fell 8% in value versus a basket of foreign currencies last year.