Import Prices in U.S. Rise 1.1%, Led by Fuels, Food

The cost of goods imported into the U.S. rose in December, led by higher prices for commodities such as fuels and food.

The 1.1 percent increase in the import-price index followed a revised 1.5 percent gain in November, Labor Department figures showed today in Washington. Economists projected a 1.2 percent gain for December, according to the median estimate in a Bloomberg News survey. Import prices climbed 0.3 percent excluding fuel, with little change in the costs of automobiles and consumer goods.

Rising demand from emerging markets like China, along with a weaker dollar, is driving up the cost of commodities. With unemployment stuck above 9 percent, companies are finding limited scope to raise finished goods prices, allowing the Federal Reserve to complete a second round of monetary easing to stimulate the economy.

“The improving economic sentiment in the U.S. and across the world is putting pressure on commodity prices,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “Core prices are still relatively tame. The Fed has some time before they feel the need to take some of the easing off the table.”

Stock-index futures maintained gains after the report, with the March contract on the Standard & Poor’s 500 Index rising 0.7 percent to 1,279 at 8:34 a.m. in New York. Treasuries fell, pushing up the yield on the benchmark 10-year note to 3.40 percent from 3.34 percent late yesterday.

Survey Estimates

Projections for December import prices in the Bloomberg News survey of 50 economists ranged from 0.4 percent to 2 percent.

For all of 2010, import prices increased 4.8 percent compared with a 8.6 percent jump in the previous year. Import prices year-over-year were forecast to rise 4.7 percent, according to the survey median.

The cost of imported petroleum rose 3.9 percent from the prior month, while prices were up 13.7 percent compared with a year earlier.

Excluding all fuels, import prices were up 3 percent from a year earlier when they rose 0.3 percent.

Prices of imported food increased 1.3 percent last month, and were up 13.1 percent from a year earlier.

Costs of imported automobiles, parts and engines were unchanged from the prior month after a 0.4 percent rise. Prices of consumer goods excluding vehicles were also unchanged after rising 0.3 percent.

Capital Goods

Imported capital goods prices were up 0.1 percent for a third straight month and 0.2 percent for all of 2010.

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 Jan. 14. The Bloomberg survey medians for those measures indicate inflation will stay tame.

An unemployment rate that’s held above 9 percent since May 2009 is also restraining labor costs. The threat of deflation, or a prolonged decline in prices that’s harmful to the economy, encouraged Fed policy makers to announce the central bank’s purchase of $600 billion in additional Treasury securities by the end of June.

WD-40 Co., a San Diego-based maker of multipurpose lubricants, is among companies trying to cope with higher raw materials costs like crude oil as it has limited ability to pass on those expenses into the price of its final products.

“We would prefer not to, however, if we need to, we will” raise our prices, Garry Ridge, chief executive officer said on a Jan. 10 conference call with investors and analysts. “What we can’t do is go to the market with regular rapid price increases.”

U.S. Dollar

Since reaching a one-year high on June 7 of last year, the dollar has fallen about 6.2 percent against a trade-weighted basket of major currencies, making imported goods more expensive.

The cost of goods from China rose 0.3 percent in December for a third month, while those from Japan also increased 0.3 percent, today’s report showed. Goods from Latin America jumped 1.4 percent and those from the European Union decreased 0.1 percent. Prices of Canadian imports rose 1.8 percent, and goods from Mexico increased 0.6 percent.

U.S. export prices increased 0.7 percent in December after rising 1.5 percent in the previous month, today’s figures showed. Prices of farm exports rose 1.7 percent, while those of non-farm goods increased 0.6 percent.

(Updates with economist’s comment in fourth paragraph.)
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