What you want LEAST OF ALL in a debt ridden
society as the U.S. is DEFLATION. Few things
are more demoralizing than watching prices drop
as your DEBT goes up.
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U.S. Import Prices Fall 0.6%; Ex-Petroleum Rises 0.1% (Update1)
By Monee Fields-White
Washington, July 10 (Bloomberg) -- The prices of goods imported to the U.S. declined in June for the first time in six months, reflecting cheaper oil and industrial supplies.
The import price index fell 0.6 percent last month after a 0.1 percent increase in May, the Labor Department said. Excluding petroleum, the measure of costs for goods purchased from abroad rose 0.1 percent.
Prices of imported goods were 3.9 percent lower than in June 2001. When petroleum costs are excluded, they have fallen 2.6 percent from the same point a year ago. Increased competition from overseas manufacturers has pushed import prices lower, explaining why companies such as Alcoa Inc. have reported declining profits.
``There is a lot of competition in the marketplace and an inability to raise prices,'' said William Sullivan, senior economist at Morgan Stanley in Jersey City, New Jersey. Inflation ``should remain at manageable levels.''
Economists expected import prices to fall 0.1 percent in June, following the government's previous estimate of no change in the May price index, according to the median of 26 economists in a survey by Bloomberg News.
Petroleum prices fell 6.6 percent last month after rising 1.6 percent in May and 12.7 percent in April. June's drop was the first since a 6.1 percent decline in December. Crude prices had slumped 13.1 percent in November.
Prices of industrial materials and supplies fell 2.5 percent, the first drop in six months. The cost of building materials fell 0.5 percent. Prices for capital goods and other business equipment were unchanged after declining 0.1 percent.
Iron, Steel, Food
The cost of steel and iron rose 4.4 percent in June, after the U.S. imposed tariffs of as much as 30 percent on some imports in March. Food prices decreased 0.3 percent, the first drop since February.
Prices of imported autos and parts rose 0.2 percent in June following a 0.2 percent decline in May. The index of imported consumer goods excluding automobiles was unchanged in June for a second straight month.
The cost of crude oil dropped to a low of $24.12 a barrel last month on the New York Mercantile Exchange, the lowest since the second week of April.
June's decline came as the International Energy Agency yesterday lowered its estimate for demand in the third quarter of this year because of a slower-than-expected global economic recovery. For the last 12 months, prices of imported petroleum are down 7.9 percent.
Low inflation has made it easier for Federal Reserve policy makers to keep the overnight bank lending rate at 1.75 percent for almost seven months, the longest stretch at so low a level since 1958. After gross domestic product contracted in the third quarter of last year, the economy rebounded in the first three months of this year at a 6.1 percent annual rate, the fastest in more than two years.
Tame Inflation
Central bankers said at their May 7 meeting that holding the benchmark rate that low ``was inconsistent'' with their goal of containing inflation over time, minutes of the meeting showed.
``However, current inflation pressures were subdued and were expected to remain so for a considerable period, thereby providing adequate opportunity to evaluate ongoing developments and tighten policy as needed later,'' the minutes said.
Increased competition from abroad explains the absence of pricing power for U.S. producers and has led to declining profit.
Alcoa Inc., the biggest aluminum maker, said this week second- quarter profit fell 24 percent as sales dropped because increased production by China drove prices lower. China's production increased 24 percent, contributing to a 9.9 percent drop in prices on the London Metal Exchange.
Prices of U.S. products exported to other countries were unchanged in June after falling 0.1 percent in May. Prices for agricultural exports rose 1.1 percent while prices for non- agricultural exports fell 0.1 percent.
Falling Dollar
The falling value of the U.S dollar this year may help American companies sell more goods overseas, while pushing up the cost of imports, economists said. Compared with a basket of currencies including the euro and the yen, the dollar is down about 3 percent this year.
``U.S. companies should get a benefit from the falling dollar,'' said Brian Wesbury, chief economist at Griffin Kubik Stephens & Thompson in Chicago. ``However, in the long run, no country has ever been successful in devaluing its way to prosperity because the devaluation of the dollar comes along with more inflation and reduced purchasing power.''
By region, prices for goods imported from Japan rose 0.1 percent last month. Prices of European Union goods rose 0.6 percent, and prices of goods from Canada, the largest U.S. trading partner, fell 1.2 percent. Prices of goods from Latin America fell 2.3 percent.
The government's import price statistics aren't adjusted to account for seasonal fluctuations, meaning there is typically little connection between the import prices index and the Labor Department's measures of producer and consumer prices. |
