Posted by Joseph Y. Calhoun, III

Import prices rose in September while export prices dropped:

The U.S. Import Price Index edged up 0.1 percent in September, the U.S. Bureau of Labor Statistics reported today, after a 1.6 percent increase in August. The September increase was led by higher nonfuel prices, which more than offset lower fuel prices. The price index for U.S. exports declined 0.3 percent in September following a 0.7 percent increase the previous month.

Imports

All Imports: Import prices ticked up 0.1 percent in September, led by a 0.6 percent increase in nonfuel prices. The price index for overall imports has only declined once since January, but despite the recent upward trend, import prices fell 12.0 percent for the year ended in September because of the sharp drop in the index at the end of 2008.  

Fuel Imports: Fuel prices decreased 1.8 percent in September following a 7.1 percent increase the previous month. The decline in fuel prices was partially driven by a 2.1 percent decline in crude prices; a 16.5 percent drop in natural gas prices also contributed to the overall decrease. Fuel prices fell 34.4 percent over the past year. 

All Imports Excluding Fuel: In contrast, nonfuel import prices rose 0.6 percent in September, the largest one-month gain since a similar 0.6 percent advance in July 2008. The September rise in the price index for nonfuel imports followed a 0.3 percent increase in August and higher prices for nonfuel industrial supplies and materials, finished goods and food all contributed to the advance. Despite the recent increases, nonfuel prices fell 4.1 percent over the past 12 months, driven by a 5.2 percent drop in the index from September 2008 to March 2009.

This is exactly what we should expect from devaluing the dollar. Import prices rise to limit imports and export prices fall to spur exports. Unfortunately, our biggest import is oil though and a lower dollar has a direct impact on oil prices. It will be very hard to reduce the trade deficit further just by devaluing the dollar. And by the way, all of you still looking for deflation? Yeah, good luck with that…..