Merk Investments: Import Prices: August 2008

 

Import Prices: August 2008 Import prices fell sharply in August. On a monthly basis the cost of imported goods declined -3/7% m/m, but saw an increase of 16.0% y/y. The primary catalyst behind the fall in the cost of imported goods were the -12.8% decline in the cost of petroleum, -8.4% fall in the cost of industrial supplied and the overall -0.3% decline in the price of goods ex-petroleum. Ex-fuels, the cost of goods rose 0.2%.

The cost of foods and beverages increased 0.7%, auto parts 0.1% and the cost of imported consumer goods were flat. Goods imported from Canada, driven by the decline in the cost of oil, fell -3.8%. While, those from Japan fell -0.1% and those from China increased 0.1%. On an annual basis the cost of goods from Canada are up 21.4%, Japan 1.8% and China 4.9%.

The August data is the first real positive news on the inflation front in quite some time. The decline in the cost of imported goods fell by larges amount in nearly two decades, mostly due to the correction in the oil market and the moderation in the price of natural gas. The Fed will find some comfort in this data and in the probability that headline inflation will see some noticeable improvement over the next few months. While, we are still more than a bit skeptical that the recent movements in the cost of commodities and oil will prove durable, should such improvements in the cost of imported goods develop into a trend the consumer can expect to see some relief on the inflation front.

Joseph Brusuelas
Merk Investments
Chief Economist/VP Global Strategy