Import Prices in U.S. Rose 0.3% in July; Ex-Petroleum 0.2%

Prices of goods imported into the U.S. rose in July, led by gains in costs of fuel, industrial supplies and clothing.

The 0.3 percent gain in the import-price index followed a revised 0.6 percent drop in June, Labor Department figures showed today in Washington. Economists projected a 0.1 percent decrease for July, according to the median estimate in a Bloomberg News survey. Prices excluding petroleum rose 0.2 percent.

Slowing growth in emerging economies such as China and Brazil, coupled with weakening demand in the U.S. amid political gridlock and stock declines, means import prices are likely to taper off this month. Federal Reserve policy makers last week said they expected inflation to “settle” lower as commodity price gains “dissipate further.”

“While core prices continue to operate higher than expected, they should roll over in coming months as trade volumes slow because the dollar looks to have found its bottom,” said Eric Green, chief market economist at TD Securities Inc. in New York. “From the Fed’s perspective they don’t want more inflation, they want less, which will make it easier for them to address some of the recent growth concerns.”

Projections

Projections for import prices ranged from a decrease of 1.8 percent to an increase of 0.4 percent, according to the Bloomberg survey of 54 economists.

Stock-index futures held earlier losses after the report on growing concern over a global growth slowdown after Germany said its economy almost stalled in the second quarter. The contract on the Standard & Poor’s 500 Index fell 1.2 percent to 1,183.9 at 8:34 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.27 percent from 2.31 percent late yesterday.

Compared with a year earlier, import prices rose 14 percent, today’s report showed. That was the largest 12-month increase since the 18.1 percent gain in the period from August 2007 to August 2008.

The cost of imported petroleum rose 0.6 percent from the prior month and was up 49 percent from a year earlier.

Excluding all fuels, import prices increased 0.2 percent from the prior month and were up 5.5 percent from July 2010.

Prices for industrial supplies excluding fuels rose 0.7 percent in July, led by costlier fertilizers and other chemicals.

Imported food was 0.5 percent more expensive last month. Costs of imported automobiles, parts and engines fell 0.3 percent, the first decline since December 2010. They were up 3.9 percent over the past 12 months.

Cotton Apparel

Consumer goods excluding vehicles showed a 0.4 percent advance after increasing 0.2 percent in June. Higher prices for cotton apparel and diamonds drove the advance for consumer goods.

Imported goods from China rose 0.4 percent, while those from the European Union rose 0.6 percent.

Federal Reserve policy makers last week said they expect “inflation will settle, over coming quarters, at levels at or below those consistent” with the Fed’s dual mandate of maintaining price stability as well as fostering job growth as “the effects of past energy and other commodity price increases dissipate further.”

Fed policy makers also said economic growth so far this year had been “considerably slower” than expected. They announced they would hold the benchmark lending rate near zero “at least” through the middle of 2013 to spur growth.

The Fed’s preferred price gauge, which excludes food and fuel, rose 1.3 percent in June from a year earlier. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their June forecast.

Commodity Costs

Most companies are finding ways to attenuate higher costs for commodities such as fuel and cotton rather than increasing prices at a time when demand is weak. Consumer spending grew at a 0.1 percent annual rate in the second quarter, the slowest in two years, the Commerce Department said last month..

Packaging Corp. of America, a maker of packaging products for shipment, is working to offset higher costs with increased volume and productivity, Mark Kowlzan, chief executive officer of the Lake Forest, Illinois-based company, said on a July 19 conference call.

“Inflationary cost pressures continued, however, and remain a concern, with higher costs reducing our earnings,” he said. “We’ve been on a roller coaster.”

Department store chain J.C. Penney Inc. is among retailers that have been able to work with suppliers to mitigate the effects of higher prices.

“Our suppliers have worked very hard with us to optimize the way we buy,” Myron E. Ullman, chairman and chief executive officer at J.C. Penney Co. Inc., said on a conference call last week. “Cotton prices are coming down, or have come down, so we’re a bit more optimistic in the second half of spring that we’ll get back to more normalized cost structure.”

Export Prices

U.S. export prices decreased 0.4 percent, the first decline in a year, after advancing 0.1 percent the previous month, today’s figures showed. Prices of farm exports fell 4.3 percent, the biggest drop since July 2009, while those of non- farm goods rose 0.2 percent.

The import-price index is the first of three monthly price gauges from the Labor Department. Data on producer prices come out tomorrow, and the consumer-price index will be released on the following day.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net NI US NI ECO NI USECO NI TRD NI INF NI AUT NI ECOSTAT NI GOV NI CHINA NI JAPAN NI EUROPE NI LATAM NI WEBDELAY0 NI UST NI FRX NI TOP NI BB

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