15-Nov-2013
Prices of goods imported into the U.S. fell in October at the fastest pace in more than a year. Overall import prices fell by 0.7% in October from a month earlier, largely driven by lower petroleum costs, the Labor Department said Friday. That was largely in line with expectations and marked the largest decline since June 2012. Prices were down 2% over the past year.
Excluding all fuels, import prices were unchanged for the month but declined 1.3% over the last year. That was the largest annual drop since October 2009, the Labor Department said. Falling import prices typically reflect weak demand abroad containing inflation pressures, a development that in turn has helped keep inflation at historically low levels in the U.S.
“With the prices of imported goods largely flat, domestic firms will have limited pricing power and that implies continued low or even decelerating inflation,” said Joel Naroff, president of Naroff Economic Advisors Inc.
Stimulus efforts by some central banks have helped make a variety of goods cheaper for American importers.
Prices from Japan, for example, continued to trend down in October, declining 3.2% over the past year — the largest 12-month drop since the spring of 2002. And prices for imported cars –a large share of which comes from Japan – dropped 1.4% since October 2012, the biggest decline since the Labor Department started collecting that data in 1981.
Lower prices from Japan are likely the result of a falling yen, and government officials have suggested in recent days they are prepared to fight to keep the currency weak. The Bank of Japan is in the midst of stimulus measures designed to boost growth in the country.
But lower import prices aren’t necessarily trickling down to U.S. consumers and pushing them to spend more.
“Not only are we importing disinflation, but we have an economy which is still stuck in a shallow growth trajectory,” said Steven Ricchiuto, chief economist at Mizuho Securities.
Low inflation domestically could encourage the Federal Reserve to maintain its $85 billion-per-month bond-buying program, which is aimed at keeping long-term interest rates low and in turn spurring hiring, spending and growth. Some economists think the central bank may rein in the program at its December meeting, while others don’t expect any changes until early next year.
Overall inflation remains well below the Fed’s 2% annual target. Its preferred gauge, the index for personal consumption expenditures, rose 0.9% year-over-year in September.
Source:- blogs.wsj.com
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