U.S. Import Prices Fell in June by Most Since January 2009 on Oil's Slide
Prices of goods imported into the U.S. fell in June by the most since January 2009, led by declines in costs of oil, business equipment and consumer goods.
The 1.3 percent decline in the import price index was more than projected and followed a revised 0.5 percent drop in May, Labor Department figures showed today in Washington. Economists forecast a 0.4 percent decrease, according to the Bloomberg News survey median. Prices excluding petroleum fell 0.5 percent, the biggest decline since March 2009.
Commodity prices have fallen on concerns that European deficit-cutting measures and Chinese efforts to slow growth will temper the global expansion. Limited wage pressures in the U.S. have enabled companies to keep a lid on prices, which may allow the Federal Reserve to keep its benchmark interest rate close to zero into 2011 to help fuel economic growth.
“Deflation is still the dominant risk over the intermediate term,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Pricing power remains virtually non-existent. The global recovery has lost some momentum.”
Economists forecast the drop would follow a previously reported 0.6 percent decline for May, according to the Bloomberg survey. Estimates of the 48 economists surveyed ranged from a gain of 0.5 percent to a decline of 1 percent.
Compared with a year earlier, import prices rose 4.5 percent, less than the median forecast of a 5.3 percent gain in the Bloomberg survey. Year-over-year gains in costs of imports have slowed since a recent peak of 11.4 percent in January.
Lower Oil Prices
The cost of imported petroleum fell 4.4 percent in June from a month earlier. Prices were up 11.7 percent compared with a year earlier. Excluding oil, import prices rose 3.1 percent from June 2009.
Excluding all fuels, import prices decreased 0.6 percent last month. They were up 2.8 percent compared with a year earlier.
The import-price index is the first of three monthly price gauges from the Labor Department. The department is scheduled to release the producer price index tomorrow and the consumer price gauge on the following day. Economists surveyed by Bloomberg forecast a 0.1 percent decline in consumer prices, the third consecutive drop.
“Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower,” Fed policy makers said in their statement June 23 after keeping interest rates unchanged. “With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.”
Rate Forecast
Economists surveyed by Bloomberg in the first week of July forecast the Fed won’t begin raising its benchmark rate until the second quarter of 2011. That compares to last month’s forecast for a quarter-point increase in the first quarter of next year.
Prices of imported food decreased 1.7 percent last month, compared with a 1.3 percent rise in May. They were up 6.2 percent from a year earlier.
Prices of imported automobiles, parts and engines fell 0.2 percent from May and increased 0.3 percent over the past 12 months.
Costs for imported consumer goods excluding autos dropped 0.4 percent last month, the most since March 2009, while prices of capital goods decreased 0.3 percent.
Industrial Supplies
Imported industrial supply costs excluding fuel fell 1.5 percent.
Alcoa Inc., the largest U.S. aluminum producer, this week reported second-quarter sales and profit that beat analysts’ estimates and forecast higher global demand for the metal, which may signal broader economic growth.
Aluminum for delivery in three months increased 39 percent on average in the second quarter from a year earlier on the London Metal Exchange. The price was still down 15 percent since March 31 and more than 40 percent from the July 2008 high, before the global recession cut demand.
“Undoubtedly we are not seeing the environment we’ve seen in the past, but we see the environment getting better and continuously moving in the right direction,” Chief Executive Officer Klaus Kleinfeld said on a conference call.
Cheaper Chinese Goods
The cost of goods from China decreased 0.3 percent, while those from Japan rose 0.1 percent. Goods from Latin America dropped 1.7 percent and those from the European Union fell 0.9 percent. Both were the biggest declines since December 2008. Prices of Canadian imports dropped 1.6 percent while imports from Mexico were down 0.8 percent.
The dollar has risen 12 percent against the euro this year as concern emerged that Greece and possibly other countries in the European Union may default on their debt. A stronger U.S. currency will help hold down the price of imports from the region in coming months.
U.S. export prices decreased 0.2 percent after rising 0.6 percent in May. Prices of farm exports fell 0.1 percent, while those of non-farm goods decreased 0.2 percent.
To contact the reporter responsible for this story: Bob Willis in Washington bwillis@bloomberg.net
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