Import price rise surprises experts

Import price rise surprises experts
Copyright © 2007, Chicago Tribune and Bloomberg News
Published April 13, 2007

WASHINGTON -- Prices of U.S. imports rose last month by the most in almost a year, led by gains in crude oil and natural gas that are likely to prevent the Federal Reserve from cutting interest rates anytime soon.

The 1.7 percent increase was more than twice economists' forecasts and followed a 0.1 percent gain in February, the Labor Department said Thursday. Imports account for about 17 percent of all goods and services purchased in the U.S.

Separately, the department said first-time jobless claims rose last week to the highest level in nearly two months.

The import figures were released a day after Fed policymakers released minutes of their March meeting in which they said higher fuel prices cause some firms to pass costs on to their customers. The Fed added that higher rates might even "prove necessary."

"It's a pretty inflation-unfriendly piece of data," said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. The recent gain in energy costs "is one of a number of factors that has made the Fed more nervous."

The import-price index is the first of three monthly price gauges from the Labor Department. The government is scheduled to release its measure of producer prices Friday and the consumer price index Tuesday.

"The recent increases in prices for energy and some non-energy imports likely would boost overall inflation in the near term and might put upward pressure on prices of some core goods and services," Fed policymakers said at their March 20-21 meeting, according to minutes of the meeting.

The Fed, which kept interest rates unchanged at the last six meetings, has been counting on a slowing economy and declines in energy prices to limit inflation.

The price of imported petroleum and its products jumped 9 percent in March. The average price of a barrel of crude oil traded on the New York Mercantile Exchange rose to $62 on March 1 from $57.30 on Feb. 1. The Labor Department bases its import-price calculations on the first day of the month. Imported natural gas prices increased 4.7 percent in March.

Weakness in the dollar has made imported goods more expensive. The dollar weakened 4 percent through March from a year earlier on a trade-weighted basis and has fallen about 18 percent since early 2002.

The government said the number of Americans filing first-time claims for unemployment benefits last week was swollen by the Easter holiday and school spring recess. Initial jobless claims rose by 19,000, to 342,000, the Labor Department said.

Holidays such as Easter occur in different weeks each year, making it difficult to adjust the data for seasonal variations, said a Labor Department spokesman. It might take a week or two for the underlying trend in firings to re-emerge, economists said.

"The claims numbers tend to get volatile around this time of year," said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn.