Import and export prices continued rising in March, according to the Department of Labor Statistics, the result of surging commodity and fuel prices as well as the backlash of a weakened American dollar.
“On a grand scale, two things are happening,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, Tuesday. “One, commodity prices are going through the roof. Two, the rise in oil prices, when it’s gone from $80 dollars to $105 or $107 per barrel, translates led bulbs into about $160 billion more that goes into foreign pockets. That’s about 1 percent of our gross domestic product, which is a pretty big chunk of change.”
Growing fuel prices and nonfuel imports including animal feed and metals led the spike in import prices, which rose 2.7 percent in March. It’s the largest increase since a similar 2.7 percent rise in June 2009.
Import prices have been steadily increasing for the past 12 months, rising 9.7 percent.
Fuel prices jumped 9 percent in March, which represents the largest monthly rise since June 2009. Over the 12-month period ended March, fuel prices ballooned by 28.7 percent, largely the result of skyrocketing petroleum prices.
Hufbauer noted that a weaker American dollar contributed to the rise in oil prices.
“The dollar is down relative to the cable ties currencies for most countries,” he said. “So, what that means is that foreign suppliers generally tend to absorb a fair amount of dollar devaluation relative to their currency.”
Adolfo Laurenti, deputy economist at Chicago-based Mesirow Financial Holdings Inc., said a weakened dollar was a “curveball.”
“The dollar has continued to weaken,” Laurenti said Tuesday. “But, there might be reason to expect the dollar to gain some ground, especially against the euro.”
Exports prices rose by a slight 1.5 percent last month, led by international demand for cotton, corn and nonagricultural industrial supplies and materials. The March boost in prices represents the largest increase since a 1.5 percent increase in November. Over the past 12 months, export prices rose 9.5 percent, the largest increase since July 2008.
Poor weather in the major corn producing countries such golf irons as Russia and Australia increased international demand for U.S. corn, pushing export prices up by 9.2 percent in March. During the past 12 months, corn prices shot up by 77.7 percent, driving a yearlong increase in overall agricultural export prices.
“The emerging economies have been doing very well in the last years,” Hufbauer said. “Those economies have been growing quite fast, and in those economies fast growth translates into pretty big additional demand for food claims, which puts pressure on the demand side.”
Hufbauer noted that as emerging economies see growth, they tend to shift toward a meat-based diet, which requires more corn for animal feed.
Similarly, an influx of Chinese demand for cotton boosted the fiber’s export prices by 10.5 percent in March, further increasing export prices.
“Again, we’ve had pretty good weather,” Hufbauer said. “Egypt is a big cotton producer, and there is a lot of chaos right now. Chaos reduces shipments, which is one reason for an increased demand for U.S.-produced cotton.”
Despite international demand for U.S. products, domestic machinery manufacturing metal halide lamp export prices hardly moved, signaling tough world competition for heavy machinery.
“It’s just part of the business cycle coming out of recession. There are up months and down months,” said Jim Nelson, vice president of communications for the Illinois Association of Manufacturers.
“It’s a competitive environment that is a living breathing things, much like the economy. As global competition becomes more intense, the less influence any one country has over price. It’s a competitive atmosphere. Producing the exercise bike best products that will be long lasting is always the way the U.S. succeeds in the world market.”
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