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.
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