Merk Investments: May Import Prices

Import prices for the month of May rose 2.3% month over month and 17.8% year over year. Ex-petroleum and ex-fuels the cost of imports rose 0.5%. The cost of petroleum increased 7.8%, foods were up 1.0%, industrial supplies climbed 5.3% and capital goods advanced 0.3%. 

The annualized 17.8% increase in the cost of imports should provide a solid reality check for those that have been making the case that the impact of import prices vis-à-vis a weak dollar should have a negligible impact on the US economy. In 2007, trade contributed roughly 17% of overall GDP and the simple fact that inflation imported via the trade channel from China alone has increased to 4.6% year over year paints a picture that we are in the process of moving towards a far higher pricing environment than is commonly acknowledged. Even for a suddenly hawkish Fed, these data must be providing some measure of indigestion for a central bank talking tough while acting dovish.

Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author.  It is based upon sources and data believed to be accurate and reliable.  Opinions and forward looking statements expressed are subject to change without notice.  This information does not constitute a solicitation or an offer to buy or sell any investment product, nor provide investment advice. Merk Investments does not own any of the stocks mentioned; this is not an offer to buy or sell any security mentioned.