Signs of Import Price Pressure
The dollar’s steep slide may be starting to show up in higher prices of more imported goods.
A price index of all imports excluding oil rose 0.7% in November from the previous month, the fastest rate since a 0.8% jump in January, the Bureau of Labor Statistics said Thursday.
Many of the increases last month occurred in imported commodities such as natural gas, metals and chemicals, the bureau’s report showed.
But economists said there were signs that price pressures were building in the consumer-goods sector as well. An index that tracks the costs of imported consumer goods, with the exception of autos, rose 0.1% last month -- the first increase since January.
“If you squint you can see the early signs of pressure” on consumer imports, said Gary Schlossberg, an economist at Wells Capital Management in San Francisco.
The weakened dollar means foreign companies get less for their goods when they’re paid for in the U.S. currency. To maintain their profit margins, foreign manufacturers must reduce their production costs or raise prices, or both.
Because of the huge volumes of goods America imports, a broad and sustained rise in prices could fuel higher inflation overall. And the Federal Reserve, which has been slowly raising short-term interest rates since June, could be forced to tighten credit much more quickly if inflation were to accelerate.
The Fed is expected to boost its benchmark rate from 2% to 2.25% when policymakers meet Tuesday.
The dollar has tumbled against the euro, the yen and other major currencies for much of the last two years, a decline that has gained steam in recent months. Yet the effect on import prices has been relatively muted.
Sharp increases in prices of some foods and industrial commodities have lifted the government’s price index for all imports, excluding oil, by 3.4% over the last 12 months. But the index of imported consumer goods excluding autos was up much less in the same period, rising 0.4%.
Some analysts said it was still far from certain that consumer import prices were poised to jump.
One reason is that the U.S. companies importing or retailing foreign goods may decide against passing higher costs through to consumers. The government’s import-price indexes measure prices paid by importers, not what end users pay.
What’s more, exporters themselves may choose to hold the line on prices rather than suffer loss of market share. The dollar has slumped against the yen since September, but the rate of increase in Japanese import prices slowed to 0.1% in November from a 0.2% increase in October, the report Thursday showed.
Also, the dollar hasn’t fallen much, if at all, against the currencies of China and other big Asian exporters that keep their currencies pegged to the greenback’s value. That has helped keep down the costs of many of the imports Americans love, including consumer electronics.
In fact, the government’s import-price indexes for computers, cameras and toys have fallen over the last 12 months even as prices of imported food, furniture and other goods have risen.
James Glassman, economist at J.P. Morgan Securities in New York, said Americans may be buying more lower-priced Asian goods in general. That could explain why the U.S. consumer price index hasn’t risen faster since 2002 despite the dollar’s decline, he said.
Excluding food and energy, consumer prices were up a relatively modest 2% in the 12 months through October, the government said last month.
Glassman said the November import price data didn’t trouble him but that the December and January numbers could be more telling. “I want to give it another month or so,” he said.
*
(BEGIN TEXT OF INFOBOX)
12-month changes
Here are the average price changes for imported goods over the last 12 months.
Category Price change*
Food +11.6% Furniture +3.4 Beverages +2.6 Cars/parts +2.1 Leather goods +0.5 Shoes +0.4 Cameras/supplies -1.2 Toys/games -1.7 Video/audio recorders -2.1 Computers -7.0
All non-oil imports +3.4
*November 2003 to November 2004 Source: Bureau of Labor Statistics
