The cost of goods imported into the U.S. rose more than forecast in February, led by further gains in commodities that companies are struggling to pass along to their customers.
The 1.4 percent increase in the import-price index exceeded the 0.9 percent median estimate in a Bloomberg News survey and followed a 1.3 percent rise in January, Labor Department figures showed today in Washington. A measure of prices paid by factories in the New York region jumped this month to the highest level since August 2008, according to another report that also showed manufacturing picked up.
Expanding economies in Asia and Latin America are generating greater demand for raw materials, and turmoil in Libya has pushed up crude oil prices. While Americans are paying more at gas stations and grocery stores, higher commodities costs will be “transitory,” a reason Federal Reserve officials today reaffirmed plans to buy $600 billion in Treasuries to spur growth.
“Underlying price pressures aren’t doing much,” said Stephen Gallagher, chief U.S. economist at Societe Generale SA in New York, who forecast a 1.5 percent February increase. “Companies that can’t really pass along the higher costs are being forced to absorb them.”
Prices excluding fuel rose 0.3 percent in February, less than half the 0.7 percent jump a month earlier, today’s Labor Department report showed. The cost of consumer goods was up 0.3 percent from the same month in 2010.
Stocks fell after Japan struggled to cool three nuclear reactors damaged by last week’s earthquake and tsunami. The Standard & Poor’s 500 Index dropped 1.1 percent to 1,281.87 at the 4 p.m. close in New York. Treasury securities increased, pushing down the yield on the benchmark 10-year note to 3.30 percent from 3.35 percent late yesterday.
Strength in U.S. manufacturing from earlier this year continued into March, a Fed report showed. The Fed Bank of New York’s general economic index rose to a nine-month high of 17.5 from 15.4 in February. Readings greater than zero signal expansion in the so-called Empire State Index, which covers New York, northern New Jersey, and southern Connecticut.
The report showed a gauge of prices paid by factories for raw materials rose to 53.3 in March from 45.8. Other components indicated manufacturing may be hard-pressed to accelerate in coming months. Figures on new orders and shipments showed slower growth.
Factories are paying more for raw materials, the Labor Department report showed. The cost of imported petroleum increased 3.7 percent from the prior month, and was up 21 percent from a year earlier, the most since May 2010.
Higher Food Costs
Import prices excluding all fuels rose 3.6 percent from February 2010, the biggest gain in more than two years, partly a reflection of food costs. Food costs over the past 12 months posted the biggest gain since records began in 1977.
Increases in commodity prices in recent months mainly reflect “rising global demand for raw materials, particularly in some fast-growing emerging market economies, coupled with constraints on global supply in some cases,” Fed Chairman Ben S. Bernanke told lawmakers on March 1. That suggests a “temporary and relatively modest increase in U.S. consumer price inflation,” he said.
Fed officials said in a statement at the end of their policy meeting today that the effects of higher commodity costs on inflation will be “transitory.” Policy makers said they will pay close attention to the evolution of inflation and inflation expectations.”
The central bank’s preferred price gauge, which excludes food and fuel, rose 0.8 percent in January from a year earlier, matching December’s year-over-year gain, the smallest in five decades of record-keeping. Fed officials aim for long-run overall inflation of 1.6 percent to 2 percent.
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 percent against a trade-weighted basket of major currencies.
Neiman Marcus Group Inc., a luxury retailer, is among companies seeing varied price pressures depending on where their products are manufactured. Europe accounts for the majority of the Dallas-based company’s imports, and the euro has been relatively stable compared with the dollar, according to Chief Executive Officer Karen Katz.
“Prices are not moving more than a little bit on goods coming out of Europe,” Katz said on a March 11 conference call. On indirect imports from China and Asia, bought through vendors who produce there, “we are seeing some price inflation in those areas due to commodity prices as well as big labor increases,” she said.
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 March 17. The Bloomberg survey median for those measures indicates inflation excluding volatile food and fuel expenses remains contained.
Another report today showed confidence among U.S. homebuilders rose in March to the highest level since May 2010. The National Association of Home Builders/Wells Fargo sentiment index climbed to 17 from a February reading of 16 as more firms anticipated stronger sales in the next six months. Measures less than 50 mean more respondents said conditions were poor.