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Falling Import Prices Provide Household Relief

Prices of goods imported into the U.S. fell in August for the second time in three months as the cost of oil and food dropped while autos stabilized.

The 0.4 percent decline in the import-price index followed a 0.3 percent increase in July, Labor Department figures showed today in Washington. Economists projected a 0.8 percent decrease, according to the median of 52 estimates in a Bloomberg News survey. Prices excluding fuel rose 0.2 percent.

Slower growth in Europe and emerging economies like China, together with less U.S. demand, may restrain the cost of goods from abroad. Federal Reserve Chairman Ben S. Bernanke last week said “transitory” influences that had pushed up some prices will wane, and that the central bank had tools to spur growth if necessary.

“We’re going to see further moderation over the next few months,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Business pricing power is getting zapped by a sluggish U.S. recovery. We should see relief, not only in import but also in consumer prices, and that should provide a lift to household purchasing power.”

Stock-index futures were little changed, erasing earlier losses, after German Chancellor Angela Merkel said she’s confident Europe will find a solution for Finland’s objections to Greece’s bailout and American retail sales increased. The contract on the Standard & Poor’s 500 Index maturing in December was at 1,156.90 at 8:55 a.m. in New York, down less than 0.1 percent from yesterday’s close.

Survey Results

Projections for import prices ranged from a decrease of 2 percent to a 0.1 percent increase, according to the Bloomberg survey.

Compared with a year earlier, import prices rose 13 percent, today’s report showed, down from a revised 13.8 percent increase in the 12 months ended in July that was smaller than previously estimated.

The cost of imported petroleum fell 2.1 percent from the prior month and was up 44 percent from a year earlier.

Import prices excluding all fuels increased 5.3 percent from August 2010, after rising 5.4 percent in the year ended in July.

Swing in Oil

“The biggest swing factor in import prices is always crude oil,” Paul Ashworth, chief U.S. economist at Capital Economics Ltd. in Toronto, said before the report. “Headline inflation should come back down, but core inflation perhaps will continue to rise for a bit,” he said, referring to prices excluding food and fuel.

Imported food was 0.8 percent less expensive last month. Costs of imported automobiles was little changed, which may reflect the easing of supply constraints following the disaster in Japan.

Toyota Motor Corp. is among carmakers offering better pricing after inventories recovered following the earthquake and tsunami. The Toyota City, Japan-based automaker is starting a blitz of U.S. model releases, some of them with cheaper price- tags, to regain sales lost to rivals such as Hyundai Motor Co. after three years that included recession, recalls and the earthquake.

Japanese Cars

Toyota last month unveiled the 2012 Camry in Hollywood, California, with price reductions ranging from $200 to $2,000 on the top-end, four-cylinder Camry, Bob Carter, group vice president of U.S. sales, said in an interview.

Consumer goods excluding vehicles showed a 0.3 percent gain and were up 2 percent over the past 12 months, the biggest year- over-year increase since November 2008. Costs for clothing made overseas climbed 1.2 percent last month.

Cincinnati, Ohio-based Macy’s Inc. (M) is passing on higher costs on selected brands by adding new designs and details to its products while other items saw no price increases, Chairman Terry Lundgren told a conference call this week.

The retailer and its venders agreed to “try to find some unique ways to add value to the product even if the price was going to be even higher than just the raw material cost,” Lundgren said. At the same time, some products, such as shoes and handbags saw cost pressures that were “not significant.”

Goods from China

Imported goods from China increased 0.1 percent, and were up 3.9 percent over the past 12 months. It was the biggest year- over-year gain since October 2008.

“We see little indication that the higher rate of inflation experienced so far this year has become ingrained in the economy,” Bernanke told the Economic Club of Minnesota last week. “Inflation is expected to moderate in the coming quarters,” he said, citing the waning of “transitory” influences like high fuel prices and global supply disruptions linked to Japan’s disaster.

Still, core prices have moved up on a year-on-year basis. The Fed’s preferred price gauge, which excludes food and fuel, rose 1.6 percent in July 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.

U.S. export prices increased 0.5 percent after declining 0.4 percent the previous month, today’s figures showed. Prices of farm exports increased 2.2 percent while those of non-farm goods climbed 0.3 percent.

Lower Dollar

The drop in the value of the dollar, which makes American goods cheaper overseas, may also be giving U.S. companies an opportunity to raise prices to shore up profits. The cost of exported autos rose 0.4 percent in August and was up 2.3 percent over the past 12 months, the biggest year-to-year gain since February 1992.

The price of consumer goods shipped overseas excluding autos climbed 5.9 percent over the past 12 months, the biggest gain since records began in 1983.

The dollar was down 8.1 percent from the end of May 2010 to Sept. 9 against a trade-weighted basket of major commercial partners.

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 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

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