Import And Export Prices Fall

The dollar has been strong which does help explain at least some of the surprising weakness for import prices which fell 0.6 percent in August to come in well below Econoday's low estimate. Prices for imported petroleum fell 3.9 percent in the month and explain some of the weakness but even when excluding petroleum, import prices still fell 0.2 percent.

Prices of foods & feeds are a positive in the month, up 0.4 percent though prices of imported finished goods remain dead flat, inching 0.1 percent lower for capital goods and unchanged for vehicles and also consumer goods. Year-on-year, finished goods prices are barely in the plus column and are led by consumer goods at only 0.6 percent.

But the weakness is more than just the dollar and imports, it's also on the export side where prices fell 0.1 percent on top of the prior month's 0.5 percent drop. Prices for finished exports are also very weak, declining 0.1 percent for both vehicles and consumer goods with capital goods up only 0.2 percent. Prices agricultural exports also inched 0.2 percent ahead though the year-on-year rate is in the negative column at 1.7 percent in what is bad news for the nation's farmers.

Price pressures on the global level are very subdued and further gains for the dollar would point to increasingly subdued levels for imported inflation. But for the Federal Reserve the risk right now is tied, not to global prices or consumer prices, but to lack of capacity in the labor market and the prospect of wage inflation.