Daily Economic Update: Import Prices, Inflation

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights import and export prices, and inflation.

• The Bureau of Labor Statistics released import and export prices today.  Prices for imports eased for the 2nd time in 14 months.  The fall was led by a 2.1% month-to-month decline in prices for petroleum and petroleum products.  However, prices for imported petroleum remain elevated at 43.5% higher than in August of 2010.
• Export prices rose 0.5% from one month earlier on growth in the price of food exports.
• Even with monthly price retreat in import prices, it is still higher by 13% compared to one year ago.  Only persistent monthly declines will bring the annual import inflation down.
• Today’s reading is important as it signals a decline in fuel led inflation that will likely be reflected in this week’s reports on producer prices (PPI) and consumer prices (CPI).  However, this decline is not likely to pass through to lower long-term mortgage rates, which are already at record lows.  If anything, falling fuel prices may enhance the long-term economic outlook, putting upward pressure on long-term rates.
• The sharp increase in gas prices in the spring put a dent in consumer confidence and consumers’ wallets.  This slow decline in gas prices will help with consumer confidence, but the decline needs to gain steam before it frees up enough cash to enhance consumer spending, which is badly in need of stimulation.  Still, prices are headed in the right direction.