U.S. Import Prices Increase More Than Forecast on Higher Food, Fuel Costs
Prices of goods imported into the U.S. rose in March at the fastest pace since June 2009, led by a gain in crude oil and the biggest jump in food costs since 1994.
The 2.7 percent increase in the import-price index followed a 1.4 percent rise in February, Labor Department figures showed today in Washington. Economists projected a 2.1 percent gain, according to the median forecast in a Bloomberg News survey. Prices excluding fuel rose 0.6 percent.
Growth in emerging economies and a decline in the value of the dollar are leading to higher costs of commodities that Federal Reserve policy makers view as “transitory.” Still, companies such as the Jones Group Inc. (JNY) are beginning to pass on some of the higher raw materials costs to consumers, while seeking ways to maintain demand.
“The weak dollar and higher oil and commodity prices continue to lift inflation,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Pricing power is still limited at the manufacturing level. That said, we’re starting to see core inflation accelerate.”
Projections in the Bloomberg survey of 50 economists ranged from increases of 1 percent to 3.9 percent.
The U.S. trade deficit narrowed in February from a seven- month high as demand for imports decreased for the first time in four months. The gap shrank 2.6 percent to $45.8 billion from a larger-than-previously-estimated $47 billion in January, Commerce Department figures showed today in Washington. Imports had reached a more than two-year high in January and exports were at record levels.
Stock-Index Futures
Stock-index futures held losses after the reports. The contract on the Standard & Poor’s 500 Index expiring in June fell 0.7 percent to 1,310.5 at 8:46 a.m. in New York. Treasuries rose, pushing down the yield on the benchmark 10-year note to 3.51 percent from 3.59 percent late yesterday.
Compared with a year earlier, import prices increased 9.7 percent, the most since April 2010. They were forecast to rise 8.6 percent, according to the survey median.
The cost of imported petroleum increased 10.5 percent in March from the prior month, the biggest jump since June 2009, and was up 31 percent from the same month last year.
Import prices excluding all fuels rose 4.2 percent from March 2010, reflecting higher food costs, the largest increase since October 2008.
Higher Food Costs
Imported food was 4.2 percent costlier last month, and was up 19 percent from a year earlier. The gain in food prices compared with a month earlier was the largest since July 1994.
Costs of imported automobiles, parts and engines rose 0.2 percent for a second month. Consumer goods excluding vehicles showed a 0.2 percent decrease, while costs of imported capital goods dropped 0.1 percent.
“Sizable increases in prices of crude oil and other commodities pushed up headline inflation, but measures of underlying inflation were subdued and longer-run inflation expectations remained stable,” the Fed said in minutes of its March 15 policy meeting released last week.
The central bank’s preferred price gauge, which excludes food and fuel, rose 0.9 percent in February from a year earlier. Fed officials aim for long-run overall inflation of 1.6 percent to 2 percent.
Unemployment, Wages
An 8.8 percent rate of unemployment and limited wages gains will help contain inflation, according to the Fed.
“In light of the projected persistence of slack in labor and product markets and the anticipated stability in long-term inflation expectations, the increase in inflation was expected to be mostly transitory if oil and other commodity prices did not rise significantly further,” the Fed said in minutes of its March 15 meeting.
Imported goods are also more expensive because of the weakening dollar. Since reaching a one-year high on June 7 of last year, the dollar has fallen 9.7 percent against a trade- weighted basket of major currencies.
Some companies are beginning to raise prices. The Jones Group, a New York-based wholesaler of apparel and footwear, has increased supply-chain efficiencies and raised prices for some products to offset higher costs.
Higher Cotton Prices
“The cost of all the raw materials, particularly cotton, skyrocketed,” Chief Executive Officer Wesley Card said in a teleconference on March 9. “We raised some prices in the first part of this year. We’re working everything we can work without taking quality out of the product to offset the effect of those cost increases, things in logistics, and whatever we can do.”
Today’s report showed the cost of goods from China rose 0.6 percent, the most since July 2008, while those from Japan climbed 0.2 percent. Goods from Latin America gained 4.1 percent, the most since June 2008, and those from the European Union increased 1.1 percent. Prices of Canadian imports rose 2.4 percent, and goods from Mexico climbed 3 percent.
U.S. export prices increased 1.5 percent after rising 1.4 percent the previous month, today’s figures showed. Prices of farm exports rose 2.3 percent, while those of non-farm goods climbed 1.3 percent.
The import-price index is the first of three monthly price gauges from the Labor Department. Producer prices are due April 14 followed by the consumer-price index on April 15. The Bloomberg survey median for those measures indicates inflation excluding volatile food and fuel expenses remains contained.
To contact the reporter responsible for this story: Bob Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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