Import Prices in U.S. Climb Less Than Economists Estimated as Metals Drop

Prices of goods imported into the U.S. rose less than forecast in November, reflecting lower costs for metals and food, indicating inflation will remain contained.

The import-price index climbed 0.7 percent, the first increase in four months and followed a 0.5 percent drop in October, Labor Department figures showed today in Washington. Economists projected the gauge would increase 1 percent, according to the median forecast in a Bloomberg News survey. Prices excluding fuel decreased 0.2 percent for a second month, the first back-to-back drop in more than a year.

Oil prices may have reached a plateau this month, indicating increases in the cost of imported goods may moderate as slowing growth from Europe to Asia and a strengthening dollar hold down prices. Federal Reserve policy makers yesterday said they expected inflation to slow and reiterated their pledge to hold the benchmark rate “exceptionally low” at least through mid-2013.

“Import prices are going to be softening,” said Neil Dutta, an economist at Bank of America Corp. in New York, who correctly forecast the gain. “Even though commodity prices may have gone up, importers are reluctant to pass those increases on to consumers.”

Projections for import prices ranged from a decrease of 0.1 percent to a 2 percent increase, according to the Bloomberg survey of 47 economists.

Stock futures declined, indicating the Standard & Poor’s 500 Index may retreat for a third day. The contract on the S&P 500 expiring in March dropped 0.1 percent to 1,218.9 at 8:48 a.m. in New York.

Compared with a year earlier, import prices rose 9.9 percent, today’s report showed, compared with an 11 percent increase in the 12 months ended in October.

Fuel Costs

The cost of imported petroleum climbed 3.6 percent from the prior month and was up 33 percent from a year earlier.

Imported food was 0.1 percent less expensive last month. Costs of imported unfinished metals slumped 5 percent, and building materials decreased 0.4 percent.

Auto imports increased 0.2 percent and were up 3.5 percent from November 2010.

Consumer goods excluding vehicles showed a 0.1 percent price gain, and were up 3.3 percent over the past 12 months.

A strengthening of the U.S. dollar over the last three months may make foreign goods cheaper in the U.S. Since Aug. 31, the Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against that of six major trade partners including the euro and yen, has gained about 8 percent after falling 11 percent in the year ended Aug. 31.

Goods From China

The cost of imported goods from China increased 0.3 percent and were up 3.9 percent over the past 12 months, the biggest year-over-year gain since October 2008.

Imported goods from Germany and the Newly Industrialized Asian Countries dropped.

“Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable” Federal Reserve policy makers said in a Dec. 13 statement after their most recent monetary policy meeting. The monetary policy making committee “also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the committee’s dual mandate” of maintaining low inflation and boosting employment.

American Eagle Outfitters Inc. (AEO), a Pittsburgh-based clothing retailer, is among companies projecting that costs will fall after cotton prices soared earlier this year.

Cotton Prices

“Strong sales growth enabled to us overcome significant pressure from higher cotton costs,” James O’Donnell, chief executive officer of American Eagle, said on a Nov. 30 conference call. “However, we do expect to benefit from lower cotton costs beginning in the second half of 2012.”

The Fed’s preferred price gauge, which excludes food and fuel, rose 0.1 percent in October after no change the prior month. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their Nov. 2 forecast.

Policy makers this week reiterated their pledge to hold the benchmark interest rate near zero at least through the middle of 2013 so long as joblessness stays high and the inflation outlook is “subdued.”

U.S. export prices increased 0.1 percent after falling 2.1 percent the previous month, today’s figures showed. Prices of farm exports climbed 1.5 percent, and those of non-farm goods decreased 0.1 percent.

The import-price index is the first of three monthly price gauges from the Labor Department. Data on producer prices come out tomorrow, followed the next day by the consumer-price index.

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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