Deflationary pressures mounting on falling prices for traded goods
Adding to deflationary pressures in the U.S. economy, prices of imported goods fell 0.2% in February, the seventh straight decline, the Labor Department estimated Friday.
Import prices are down 12.8% in the past year, the largest year-over-year decline in the 26-year history of the index. Import prices fell a revised 1.2% in January, a tenth lower than initially reported.
The 0.2% decline in February was the smallest decline since July, as imported petroleum prices increased 3.9%, the first increase in seven months. Economists were expecting a larger decline of 0.7%.
Non-fuel import prices fell 0.4%, the government said. Capital goods prices fell 0.4%. Non-petroleum industrial supply prices fell 2%.
A year or two ago, rising import prices were fueling inflationary pressures. Strong global demand had pushed up prices of industrial materials and supplies, including petroleum, chemicals and plastics.
But that has all reversed now, with the world economy in its worst slump since World War II. Weak demand has forced prices lower, and the dollar has been strengthened by the perception that U.S. assets may be safer than any others. A strong dollar makes imports relatively cheaper.
Meanwhile, U.S. consumer prices have been unchanged over the past year, the lowest inflation since the mid-1950s.
Federal Reserve officials have said they are concerned, but not overly so, that prices could continue to decline and imbed a deflationary expectation into consumers and producers. A general price decline, including falling wages, could worsen and prolong the recession by creating incentives to delay all spending and investing.
Details
Prices received by U.S. exporters fell 0.1% in February, the sixth decline in the past seven months. Prices of agricultural exports fell 1.7%, while non-agricultural export prices rose 0.1%.
Export prices were down 4.5% in the past 12 months, the largest year-over-year decline on record.
Prices of goods imported from Canada fell 1.6%, while Mexican import prices fell 1.3%.
Prices of European imports were unchanged.
Prices of Chinese goods fell 0.5%.
