U.S. Import Prices Rise More Than Forecast in July

By Timothy R. Homan

Aug. 13 (Bloomberg) -- Prices of goods imported into the U.S. rose more than forecast in July as a weaker dollar and higher fuel and food costs made foreign purchases more expensive.

The import price index increased 1.7 percent after rising a revised 2.9 percent in June, the Labor Department said today in Washington. The index rose 21.6 percent from a year ago, the biggest year-over-year jump since the report was started in 1982. Prices excluding petroleum rose 0.9 percent last month from June and were 8 percent higher than a year earlier, the biggest annual increase in 20 years.

The rising cost of imports may add to concern that American companies will follow their competitors abroad in raising prices. The Federal Reserve has held its benchmark interest rate at 2 percent as policy makers weigh the risks of inflation and slow growth.


``We have a global environment that's inflationary,'' said Joe Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California, who forecasted a 1.8 percent increase for July. ``While the temporary increase in the value of the dollar will help on the margin, we are in the midst of a long-term trend in inflation.''

Another report from the Commerce Department showed sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices siphoned some of the tax rebates out of consumers' pockets.

The 0.1 percent decrease matched the median forecast and followed a 0.3 percent gain the prior month that was larger than previously reported. Purchases excluding gasoline fell 0.2 percent.

Import prices were projected to rise 1 percent, according to the median estimate of 51 economists surveyed by Bloomberg News, after an initially reported 2.6 percent gain in June. Forecasts ranged from no change to a gain of 2 percent.

Food prices rose 1.5 percent in July and were up 15.7 percent from a year earlier, the largest annual increase since the index started in September 1977. Capital goods increased 0.3 percent after a decline of 0.1 percent in June, and industrial supplies were 3.3 percent more costly last month, the report showed.

Trade Balance

The import-price index is the first of three monthly price gauges from the Labor Department. Government reports are due tomorrow for the consumer price index and Aug. 19 for producer prices.

A report yesterday from the Commerce Department said the U.S. trade deficit in June unexpectedly shrank 4.1 percent to $56.8 billion. Imports rose 0.8 percent to $221.2 billion, reflecting a record $44.5 billion in purchases of foreign petroleum, as well as record increased demand for foreign-made autos and parts.

Nissan Motor Co., Japan's third largest carmaker, posted an 8.5 percent gain in U.S. auto sales last month.

Today's Labor Department report showed prices of imported automobiles, parts and engines last month rose 0.1 percent, and costs for imported consumer goods excluding autos increased 0.3 percent.

The price of imported petroleum and petroleum products gained 4 percent after an 8.9 percent increase in June. Prices were 79.2 percent higher than a year earlier.

Oil Prices

Crude oil futures have increased 58 percent in the past year. Oil futures today rose 23 cents, to $113.24 a barrel, on the New York Mercantile Exchange at 7:48 a.m. in Washington. Prices are down 23 percent from a record $147.27 a barrel reached on July 11.

Fed officials foresee inflation moderating through the second half of the year and into 2009. Still, the outlook for prices is ``highly uncertain,'' the Federal Open Market Committee said in a statement last week.

Imports are also becoming costlier because the dollar weakened 6.9 percent in the 12 months through July against a trade-weighted basket of currencies of major U.S. trading partners.

Prices of goods from China were up 0.9 percent, those from Latin America rose 2.4 percent and imports from the European Union cost 0.7 percent more in July.

U.S. exports prices increased 1.4 percent after rising 1 percent the prior month. Prices of farm exports increased 6.7 percent, while those of non-farm exports were up 0.8 percent.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net