Introduction
Earlier today, the Labor Department reported that import prices rose 0.2% during July. This resulted in a gain of 5.5%, year over year, and a 6.5% three-month annualized rise. Both numbers indicate that inflationary pressure from this source persists. Elsewhere, retail sales rose 0.7%, somewhat shy of Wall Street expectations.
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Import Prices
According to today's release from the Labor Department, July import prices rose 0.2%, versus a revised 0.1% decline during June. (The June change originally had been reported as minus 0.2%.)
Based on today's report, the price of petroleum imports rose 0.9% in July (compared with minus 0.9% in June), and the price of non-petroleum imports were up 0.1% (versus a 0.0% change in June).
Through July, import prices rose 5.5% year over year, versus 5.8% for the 12 months ended June. Over the three months ended July, they were up at a 6.5% annual rate, which compares with a 7.0% rate for the three months ended June.
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. Based on the analysis of recent import-price data, domestic inflationary pressures from this source continue.
Remember, too, a regular admonishment of ours for years now, which has been that inflation data coming out of the Labor Department have reflected the fruits of a major effort during the 1990s to understate the numbers!
And on this subject, a thought expressed last month: "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 is a way of illustrating how the United States has been importing a rising level of inflation from abroad, a sensible outcome when contemplated in commonsense terms. After all, the US is a nation that imports more and more of what it consumes, since it makes less and less of it domestically. And this rising consumption has been against the backdrop of a falling exchange-rate value for the dollar, on balance, 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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July 5.5% 2.3% -1,7% -4.1% 6.8%
June 5.6% 2.2% -3.6% -2.6% 7.9%
May 6.8% 1.0% -3.7% -0.8% 6.1%
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3-Mo. Avg. 6.0% 1.8% -3.0% -2.5% 6.9%
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April 4.6% 1.8% -3.6% -0.7% 6.6%
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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7-Mo. Avg. 3.8% 3.9% -5.1% -1.0% 7.6%
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Retail Sales
This morning, the Commerce Department reported a 0.5% increase in July retail sales, a bit shy of Wall Street expectations. However, Commerce revised June's reported decline from 1.1% to minus 0.5%.
During July, automobile sales rebounded to +2.4%. When you exclude auto sales, July retail sales rose 0.2%.
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