Merk Investments: Import Prices

Import prices for the month of July 2008 increased by 1.8% m/m and 21.6% y/y. The ex-petroleum estimate increased 0.9% m/m and the ex-fuels component climbed 0.7% and 6.9% over that same time frame. The cost of imported petroleum rose 4.0% m/m, food and beverages advanced 1.5%, while industrial supplies climbed 3.3% in July. Inside the data the cost of imported durables rose 1.7%, non-durables ex-petroleum climbed 3.0%, while fuel and lubricants advanced 4.0% for the month. The cost of capital goods and consumer goods ex-autos climbed 0.3%.

Looking at imports from the US major trading partners the data suggest that inflation imported via the trade channel is picking up. As a percentage of US imports trade with Pacific Rim countries represents 33.82% vs. the 17.355% accounted for by the European Union. The cost of goods from the Pacific Rim increased 0.8% m/m and 4.7% y/y. Goods imported from China increased 0.9% m/m and 5.3% annually. Cost of goods from the EU increased 0.7% m/m and 10.4% y/y. Goods imported from Latin America which accounts for 18.032% of all imported goods increased 2.4% m/m and 31.7% y/y. Trade with Canada, which comprises 16.032% of all goods imported by the US advanced 1.7% m/m and 29.2% y/y.

The recent nadir of the dollar and rise in fuel costs provided the major impetus behind the higher cost of imported goods in July. The year over year increase is the single largest increase in the index since the Labor Department started tracking the data in 1982. While, much has been made of the recent easing in the cost of imported oil and the rise in the value of the dollar the data does suggest that there are problems in the inflationary environment outside of transportation. The cost of food and industrial supplies continues to surge and regardless of the easing in petroleum the increasing cost of imported goods remains an issue that will not subside for some time.