Bloomberg News

Import Prices in U.S. Unexpectedly Rise on Autos, Clothing

June 10, 2011

(Updates with market prices in fifth paragraph.)

June 10 (Bloomberg) -- Prices of goods imported into the U.S. unexpectedly rose in May as increasing costs for consumer goods like autos and clothing overshadowed the first drop in fuel expenses in eight months.

The 0.2 percent increase in the import-price index, its eighth consecutive gain, followed a revised 2.1 percent climb in April, Labor Department figures showed today in Washington. Economists projected a 0.7 percent decrease for last month, according to the median estimate in a Bloomberg News survey. Costs advanced 12.5 percent from May 2010, the biggest 12-month increase since September 2008.

Growing demand from economies in Asia and Latin America, paired with a weaker dollar, is pushing up the cost of goods from abroad for businesses like Gap Inc. At the same time, Federal Reserve Chairman Ben Bernanke has reiterated that he expects elevated commodity costs to moderate.

“The trend is still upwards,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts, said before the report. “Emerging markets are seeing cost pressures. In addition, there’s still a downward trend in the dollar, certainly against emerging market economies, which tends to push import prices up.”

Stock-index futures held earlier losses after the report and Treasury securities rose. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.2 percent to 1,279.3 at 8:35 a.m. in New York. The yield on the benchmark 10- year note, which moves inversely to prices, fell to 2.96 percent from 3 percent late yesterday.

Survey Results

Projections in the Bloomberg survey of 55 economists ranged from decreases of 2 percent to increases of 0.3 percent.

Compared with a year earlier, import prices rose 12.5 percent, the biggest 12-month gain since September 2008. They were forecast to increase 11.2 percent over the past 12 months.

The cost of imported petroleum decreased 0.4 percent from the prior month and was up 45 percent from a year earlier.

Excluding all fuels, import prices increased 0.4 percent from the prior month. They were up 4.4 percent from May 2010, matching the year-over-year gains in the prior two months as the largest since October 2008.

Costs of imported automobiles increased 0.5 percent from the prior month. Consumer goods excluding vehicles showed a 0.3 percent gain, led by a 0.7 percent gain for cotton apparel.

Cotton Prices

Glenn Murphy, chief executive officer of Gap, the largest U.S. apparel chain, said his San Francisco-based company needs to work more directly with mills making his company’s clothes because “for 30 years nobody has ever seen this kind of inflation.”

“This year we’re dealing with not only some economic headwinds, but obviously we’re dealing with huge inflationary pressure, which has taken our operating margin down,” Murphy said during a June 8 presentation.

Imported food prices fell 0.5 percent, the first decrease since June 2010, today’s report showed.

The rising oil prices that helped make imports more expensive in April have since moderated. Crude oil futures on the New York Mercantile Exchange reached $113.93 a barrel on April 29, the highest level since September 2008, before closing at $102.7 a barrel on May 31.

Federal Reserve Chairman Ben S. Bernanke said this week he doesn’t see “much evidence that inflation is becoming broad- based or ingrained.” The chairman said the economy will likely pick up as fuel costs moderate and parts supply disruptions ease as factories in Japan recover.

Fed’s View

The central bank’s preferred price gauge, which excludes food and fuel, rose 1 percent in April from a year earlier. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their April forecast.

“There are good reasons to believe that commodity prices will not continue to rise at the rapid rates that we have seen recently,” Bernanke said at a June 7 speech in Atlanta Costlier commodities lead households and businesses to adjust spending and production, which curtails demand, while temporary factors like adverse weather abate and reduce prices, the chairman said

The cost of goods from China rose 0.3 percent, while those from Japan were unchanged, the report showed.

U.S. export prices increased 0.2 percent after rising 0.9 percent the previous month, today’s figures showed. Prices of farm exports fell 2 percent, while those of non-farm goods climbed 0.5 percent.

The import-price index is the first of three monthly price gauges from the Labor Department. Producer prices are due June 14 and the consumer-price index on the following day. The Bloomberg survey median for those measures indicates inflation excluding volatile food and fuel expenses remains contained.

--With assistance from Chris Middleton in Washington. Editor: Carlos Torres

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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