Import Price Growth More Restrained Than Anticipated

Retail sales rose +.2% MoM (consensus +.8%) and +13.6% YoY (consensus +14%) in February. January's record rise was pushed higher to 13.8% YoY from the previously reported +13.7% annual gain. The petroleum prices have risen over 60% YoY, they fell -1.5% MoM in February. Excluding petroleum, which has been the major driver of higher import prices this past year, import prices rose a much slower +4.5% YoY for all other categories of goods. Other categories which have experienced large import price increases over the past year include industrial supplies (+35% YoY) and foods (+11% YoY). But, imported food costs fell in February by -.1%, the first monthly decline in almost a year. The largest price increases this year have been coming from Canada at +13.7% YoY. This is a combination of the stronger Canadian dollar, and the large importation of energy products from Canada. Canada is not the U.S.'s second largest trading partner behind China. China became the largest trading partner last year, and Chinese import prices rose a more moderate +3.4% YoY, though still a new record high. China is no longer spreading deflation. Japanese import prices are also slowly trending higher. A reduction in inflation will help reduce the erosion of U.S. workers purchasing power. The dollar has fallen about 10% over the past year versus a basket of major trading partner currencies. Unfortunately, most of this month's improvement was in imported petroleum costs, which we know will not continue, as oil has risen to new record highs in March. Excluding petroleum, import prices rose +.6% MoM.