Summary
The Labor Department reported yesterday that with help from a 1% decline in petroleum prices, import prices overall fell 0.2% in June. Excluding petroleum, prices during the month were unchanged. Some on Wall Street immedieately bulled these results as being better than we believe they really are. Elsewhere, retail sales fell 1.1% last month, which was worse than the Street had been expecting.
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Import Prices
According to yesterday's release from the Labor Department, June import prices fell 0.2%. The price of petroleum and petroleum related products declined 1% during the period, contributing to no change in overall prices.
Through June, import prices rose 5.6% year over year, versus 6.8% for the 12 months ended May. Over the three months ended June, they were up at a 5.7% annual rate, versus a 10.0% rate for the three months ended May.
So as you would expect, some on Wall Street immediately spun a very positive tale around these results. But I would caution against being too hasty here.
The key reason we were ahead of the curve in predicting a return to more inflationary numbers in general was our approach months ago to pulling apart and analyzing the data from various series. Remember, too, a regular admonishment of ours for years now, which has been that the inflation data coming out of the Labor Department has reflected the fruits of a major effort during the 1990s to understate the numbers!
Nevertheless, if you can use government numbers to disprove the government's contention that there is no inflation, it's all to the good.
The following table -- the first time it has appeared -- is a way of illustrating how the United States has been importing a rising level of inflation from abroad. And this is a sensible outcome. After all, we are a nation that imports more and more of what we consume, since we make less and less of it domestically. And this rising consumption has been against the backdrop of a falling exchange-rate value for the dollar over the last couple years.
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U.S. IMPORT PRICES
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12-Month Change as of
Month of Year Shown
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Month 2004 2003 2002 2001 2000
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June 5.6% 2.2% -3.6% -2.6% 7.9%
May 6.8% 1.0% -3.7% -0.8% 6.1%
April 4.6% 1.8% -3.6% -0.7% 6.6%
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3-Mo. Avg. 5.7% 1.7% -3.6% -1.4% 6.9%
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March 1.1% 6.8% -5.6% -1.6% 9.2%
February 0.9% 7.5% -8.3% 0.2% 9.3%
January 2.2% 5.8% -8.9% 2.8% 7.1%
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6-Mo. Avg. 3.5% 4.2% -5.6% -0.5% 7.7%
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Retail Sales
Yesterday morning, the Commerce Department reported a 1.1% dip in June retail sales, which was a good deal sharper than the consensus estimate. This compared with a revised gain of 1.4% for May. Excluding autos, June retail sales fell 0.2%, versus a 0.9% gain in May.
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