Summary
Yesterday morning, the Labor Department reported that import prices surged 1.8% during March, led by a 10.6% increase in petroleum prices. Those results have potentially negative implications for March trade data that will be released during May and, in turn, for first-quarter gross domestic product.
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The Stock Market
Because of the stock market's behavior this past week, yesterday's performance in particular, I plan to publish a special strategy update. It will be out sometime tomorrow.
Additional Information on March Import Prices
According to yesterday's release from the Labor Department, import prices registered a 1.8% increase during March, which compares with a 0.8% rise during February. (The February change was unrevised from the original release.) The March increase was the largest since January of 2003.
As of March 2005, the year-over-year increase in import prices was 7.1%, versus a much lower 1.1% 12-month gain as of March 2004.
Based on yesterday's numbers, the price of petroleum imports surged 10.6% in March, which followed respective gains of 2.3% and 4.6% in January and February.
As of March 2005, petroleum import prices were 36.1% above their year earlier level. This compared with a year-over-year rise of only 1.3% as of March 2004.
March import prices excluding the petroleum component rose 0.3%, versus a February increase of 0.1% (reported originally as +0.2%). The March gain resulted in a year-over-year rise in this sector of 2.9%. As of March 2004, import prices, excluding petroleum, were up 1.0% 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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03/05 1.8 13.3 7.1 0.3 2.8 2.9 10.6 96.5 36.1
02/05 0.8 -0.4 6.0 0.1 3.2 2.9 4.6 -19.2 29.3
01/05 0.6 -4.5 5.7 0.3 6.6 3.1 2.3 -47.2 24.3
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12/04 -1.4 -0.4 6.7 0.4 4.9 3.7 -11.4 -26.6 30.3
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
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03/04 0.8 11.5 1.1 0.2 5.9 1.0 5.1 64.8 1.3
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Yesterday's import price data could be a negative portent for key economic series that will be released during May, to wit: They could hurt March trade data and, in turn, the second or "preliminary" estimate of gross domestic product for the first quarter, when it is released in late May.
The sharp decline in the price of crude oil imports late last year had a favorable impact on the January trade figures. However, February's and today's reports on import prices confirm that higher prices for imported crude got into and remain in the "official" per barrel pricing numbers.
In turn, were higher crude prices to help ratchet up the overall trade deficit for March, the phenomenon would create a drag on revised first-quarter GDP from the net-export area. For January and February, the total value (not necessarily the per barrel price) of imported oil actually helped the overall trade deficit.
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