Summary
Earlier today, the Labor Department reported that import prices rose 0.8% during February, led by a 3.9% increase in petroleum prices. Today's results have potentially negative implications for key economic data that will be released during April.
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According to today's release from the Labor Department, import prices registered a 0.8% increase during February,
which compares with a revised 0.7% rise during January. (The January change originally had been reported as +0.9%.)
As of February 2005, the year-over-year increase in import prices was 6.1%, versus a much lower 0.9% 12-month gain as of February 2004.
Based on today's numbers, the price of petroleum imports rose 3.9% in February, which followed a 3.4% gain in January (the latter revised down from the 4.6% increase reported last month).
As of February 2005, petroleum import prices were 29.6% higher than one year earlier. This compared with a year-over-year decline of 4.7% as of February 2004.
February prices for imports excluding the petroleum component rose 0.2%, versus a January increase of 0.3% (reported originally as +0.2%). The February gain resulted in a year-over-year rise in this sector of 2.9%. As of February 2004, import prices, excluding petroleum, were up 1.9% from a year earlier.
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U.S. IMPORT PRICES - % CHANGE
(3-Mo.= Three-month Compound Annual Rate)
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All Imports, Petroleum
All Imports Excl. Petrol. Imports Only
Month/ -------------- --------------- ---------------
Year Mo. 3-Mo. Y/Y Mo. 3-Mo. Y/Y Mo. 3-Mo. Y/Y
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02/05 0.8 0.0 6.1 0.2 3.6 2.9 3.9 -18.6 29.6
01/05 0.7 -4.1 5.8 0.3 6.6 3.1 3.4 -45.3 25.4
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12/04 -1.4 -0.4 6.7 0.4 4.9 3.7 -11.5 -27.0 30.1
11/04 -0.3 7.5 9.0 0.9 3.6 3.6 -6.0 35.9 54.5
10/04 1.6 15.3 9.9 -0.1 1.2 2.9 11.1 143.7 67.8
09/04 0.5 9.8 8.2 0.1 1.6 2.9 3.3 75.1 53.5
08/04 1.5 6.8 7.1 0.3 1.6 3.1 8.8 46.7 39.9
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02/04 0.4 11.2 0.9 0.4 6.3 1.9 0.5 64.7 -4.7
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Today's import price data may well be a negative portent for key economic series that will be released during April, to wit: February trade data, and the advance estimate of gross domestic product for the first quarter.
The decline in the price of crude oil imports in recent months has had a favorable impact on monthly trade figures. Today's report on import prices is confirmation that the reversal in crude prices has now made its way into the "official" numbers.
In turn, were higher crude prices to help ratchet up the overall trade deficit for the months of February and March, it is quite possible the phenomenon would result in a GDP figure for the first quarter that is lower than current forecasts. Remember that the January trade deficit was recently reported at $58.3 billion. Were the February and March numbers to come in at the same level, it is almost a certainty it will produce a sizable drag on GDP. Here's a rough estimate.
Take $58.3 and multiply it by three (January, February and March), then multiply the result by four (to annualize it). This comes out to $699.6 billion. The net export figure used in the preliminary estimate of 2004 fourth-quarter GDP was minus $623.4 billion, or $76.2 billion less.
The actual calculations employ a somewhat different methodology, but what I've shown above is acceptable for the purpose of directional estimation. Also, at the end of this month, the Commerce Department will publish one more estimate of last year's fourth-quarter GDP. This will provide more contemporary data with which to make certain assumptions.
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