Much of what makes up the index still contained
Led by a 7.3% rise in fuel costs, the import price index jumped a hefty 1.7% in November. Ex-fuel, prices increased 0.4%, which comes on top of price increases that have averaged a like amount in the prior three months.
At first glance, the weakening dollar appears to be igniting a broad-based rise in import inflation, which at this early juncture in the business cycle, would be disturbing.
Digging deeper, the rise in core import inflation is directly the result of sharp gains in raw material costs, which can be tied in part to the falling dollar, while China’s strong appetite for commodities is also playing a role.
But outside basic commodities, pricing pressure are well contained.
Consumer goods, which make up one quarter of the index, have barely moved over the last four months. And capital goods, which account for nearly a quarter of import prices, have averaged gains of less than 0.1% in each of the last four months, according to government data.
Credit the weak US economy and excess global capacity for the inability to boost prices.
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