U.S. December Import Prices Fall 4.2%, Down 1.1% Excluding Oil

By Timothy R. Homan

Jan. 14 (Bloomberg) -- Prices of goods imported into the U.S. fell in December for a fifth consecutive month as commodity costs eased, a sign the recession is restraining inflation.

The import-price index decreased 4.2 percent, less than economists forecast, after a revised 7 percent drop in November, the Labor Department said today in Washington. Prices from a year earlier were down 9.3 percent, largest year-over-year decline since the index was first published in 1982. Prices excluding fuels dropped 1.1 percent.

Today's figures indicate American companies may keep prices low amid a global slowdown in demand. President-elect Barack Obama and Congress are under pressure to enact a fiscal stimulus package to help pull the world's largest economy out of a recession now in its second year.

``Inflation will sag further, even stripping out commodities,'' Richard Berner, co-head of global economics at Morgan Stanley in New York, said before the report. ``Slack overseas demand will put downward pressure on import prices, and the dollar has stopped declining.''

Import prices in December were forecast to fall 5.3 percent after an initially reported 6.7 percent drop the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News. Forecasts ranged from declines of 1.8 percent to 8.5 percent.

Record Year

Compared with a year earlier, prices of imported goods dropped a record 9.3 percent following a 5.4 percent year-over- year decrease in the prior month. Excluding all fuels, import expenses rose 0.9 percent in the 12 months to December.

The import-price index is the first of three monthly price gauges from the Labor Department. The index of wholesale prices is due tomorrow, and the consumer price gauge will be released on Jan. 16. Both are forecast to decline, according to the survey.

The price of imported petroleum and petroleum products decreased 21.4 percent after a 28.5 percent drop in the previous month. Prices were down 47 percent from a year earlier.

Crude oil futures, which peaked at $147 a barrel in July, traded at $36 yesterday on the New York Mercantile Exchange.

Food import prices were up 2.3 percent in December after a 4.7 percent decline the prior month. Imported food was 5.7 percent more expensive than a year earlier.

The U.S. trade deficit narrowed 29 percent in November, the most in 12 years, as Americans bought fewer goods and services from overseas, the Commerce Department said yesterday. The gap shrank more than forecast to $40.4 billion from a revised $56.7 billion in October, with imports falling to their lowest level in three years.

Capital Goods

Imported capital goods were down 0.3 percent in December and gained 0.3 percent from a year earlier, today's report showed.

U.S. exports prices fell 2.3 percent last month, the fifth straight monthly decline. Prices of farm exports decreased 6.5 percent, while those of non-farm exports declined 1.9 percent.

Prices of imported automobiles, parts and engines fell 0.2 percent, and costs for imported consumer goods excluding autos increased 0.1 percent.

Demand for both domestic and foreign automobiles remains weak. Toyota Motor Corp. and Honda Motor Co. said this month that December sales in the U.S. plummeted by more than a third, ending annual gains for Japan's two largest automakers dating back to the mid-1990s.

Prices of goods from China were down 0.4 percent, those from Latin America fell 6 percent and imports from the European Union cost 1.7 percent less.

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