Import Prices in U.S. Rose 0.7% in August as Energy Costs Jumped

Prices of goods imported into the U.S. rose in August for the first time in five months as the cost of petroleum surged.

The 0.7 percent increase in the import-price index was less than forecast and followed a revised 0.7 percent decline in July, the Labor Department reported today in Washington. Economists projected the August gauge would rise 1.5 percent, according to the median estimate in a Bloomberg survey. Costs excluding fuel decreased for a fourth month.

The cost of goods and materials other than oil from abroad may be restrained as cooling markets from Europe to Asia limit demand for commodities like metals. Companies may find it difficult to pass along higher energy prices as consumers face limited job and income growth.

“The underlying picture on prices is generally subdued,” Sean Incremona, senior economist at 4Cast Inc. in New York, said before today’s report. “Most of the upside we’re seeing recently is going to be due to oil prices, which have rebounded pretty significantly from lows earlier this year. Final demand looks weak across the board.”

Projections for August import prices ranged from a 0.5 percent decrease to a 2 percent increase, according to the Bloomberg survey of 47 economists.

Against a backdrop of limited inflation, Federal Reserve policy makers will weigh additional accommodation to help bolster an economy that’s weakened this year. Chairman Ben S. Bernanke and his colleagues at the central bank, who begin a two-day meeting today, may add to record monetary stimulus.

Bernanke last month at a speech in Jackson Hole, Wyoming, made the case for unconventional policies.

Fed’s Bernanke

“As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation,” Bernanke said Aug. 31. “The stagnation of the labor market in particular is a grave concern.”

Import prices minus fuel fell 0.5 percent in August from the same month last year, the first year-over-year decrease since November 2009, today’s figures showed. Including fuel, import costs dropped 2.2 percent in the 12 months ended in August.

The import-price index is the first of three monthly price gauges from the Labor Department. Producer prices are due tomorrow, and the consumer-price index on the following day.

The cost of imported fuel increased 4.1 percent in August from the prior month, the biggest gain since March.

Imported food and beverages were 0.9 percent cheaper last month, today’s report showed.

Domestic Food

U.S. consumers and businesses may soon feel the effects of higher food prices after the worst drought in the Midwest in 76 years. More expensive corn feed has ranchers sending more of their cattle to market, which means a smaller herd and higher prices early next year.

“Clearly with the drought, we expect that that could have an impact on food prices,” Kathee Tesija, executive vice president of merchandising for Minneapolis-based Target Corp., said on an Aug. 15 earnings call. “Haven’t seen that yet, so I think that’s probably still to come.”

At the same time, the value of the dollar has started to decline amid speculation the Fed will pursue a third round of so-called quantitative easing. Since reaching an intraday high this year on July 24, the Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the currency against that of six major trade partners including the euro and yen, has dropped about 5.2 percent.

A decline in the dollar makes imported goods more expensive going forward.

Imported Autos

Prices for imported automobiles and parts were unchanged in August after a 0.3 percent increase in the prior month, today’s report showed. The cost of imported capital goods fell 0.1 percent from the previous month.

The cost of imported goods from China were unchanged in August and up 0.8 percent over the past 12 months.

Imported goods from Japan were also unchanged, while the cost of products from the European Union decreased 0.4 percent. Goods from Mexico increased 0.1 percent.

U.S. export prices climbed 0.9 percent in August, the biggest increase since March 2011, today’s report showed, after rising 0.4 percent the previous month. Prices of farm exports jumped 5.1 percent and those of non-farm goods increased 0.4 percent.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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