July 10 (Bloomberg) -- Prices of goods imported into the U.S. rose in June for a fourth straight month as oil costs jumped by the most in a decade. The 3.2 percent gain in the import price index followed a revised 1.4 percent increase the month before that was larger than previously estimated, according to a Labor Department report today in Washington. While prices excluding fuels rose 0.2 percent, they were down a record 6.5 percent from June 2008. Rising commodity costs will hurt company profits because the worst recession in half a century has made it difficult for businesses to pass on expenses to customers. Projections for a slow economic recovery and sluggish job market indicate inflation pressures will continue to be subdued. “You can’t ignore the amount of slack in the economy,” Ellen Zentner, senior U.S. macroeconomist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report. Referring to Federal Reserve policy makers, she said, “how much can they let the possibility of a resurgence in inflation sway them when they’re starting at such a high unemployment rate and such low capacity utilization?” The U.S. trade deficit unexpectedly fell in May to the lowest level in almost a decade as exports jumped while imports of crude oil and auto parts declined. The gap between imports and exports decreased 9.8 percent to $26 billion, the smallest deficit since November 1999, from a revised $28.8 billion in April that was lower than previously estimated, the Commerce Department said today in Washington. Forecast Prices Economists forecast prices would rise 2 percent, according to the median of 50 responses in a Bloomberg News survey, from a previously reported 1.3 percent gain in May. Estimates ranged from increases of 0.8 percent to 4.2 percent. Compared with a year earlier, prices of imported goods fell 17 percent compared with an 18 percent year-over-year drop the month before. The import-price index is the first of three monthly price gauges from the Labor Department. The index of wholesale prices is due on July 14, followed by consumer prices the next day. The price of imported petroleum and petroleum products increased 20 percent, the largest increase since April 1999 and the fifth consecutive monthly increase. Prices were 46 percent lower than a year earlier. Crude oil futures on the New York Mercantile Exchange closed at $60.43 a barrel yesterday after averaging $69.70 a barrel in June. Slumping Dollar A slumping dollar may also boost import prices in coming months. The greenback was down 8.5 percent through last week against a trade-weighted basket of currencies of major U.S. trading partners since reaching a five-year high in March. Today’s report showed the cost of imported capital goods, such as generators, machinery and trucks, fell 0.1 percent last month, compared with no change in May. Consumer goods excluding automobiles rose 0.1 percent and were down 0.7 percent over the last 12 months. Prices of imported automobiles, parts and engines rose 0.1 percent. Prices of goods from China fell 0.1 percent, those from Japan rose 0.7 percent -- the largest increase since November 1998 -- and those from the European Union gained 0.7 percent. Products from Latin America cost 4.3 percent more. U.S. export prices rose 1.1 percent after increasing 0.5 percent the prior month. Prices of farm exports gained 4.8 percent, while those of non-farm exports rose 0.8 percent. Falling Prices Federal Reserve Bank of Chicago President Charles Evans said July 8 in a speech that forecasting inflation is “particularly difficult,” adding there are risks for both inflation and falling prices. “Currently, core inflation is near 2 percent, a level I generally find acceptable,” Evans said in South Bend, Indiana, referring to consumer prices excluding food and energy on a year-over-year basis. “In the near term, I think the downward forces on inflation will be greater than the upward forces, and we could see some declines in core inflation. But over the medium term I see the risks to the inflation forecast as being more balanced,” he said. Fed policy makers last month voted to keep the overnight lending rate between banks at a record low range of zero to 0.25 percent and said they expect “inflation will remain subdued for some time.” Boost Profit Cost increases for ingredients and packaging will slow this year, helping to boost profit, General Mills Inc. Chief Executive Officer Ken Powell said July 1. Powell said he expects “little or no” price growth this year as input-cost gains slow from 9 percent in 2008. General Mills, the Minneapolis-based maker of Cheerios and Hamburger Helper, raised prices in fiscal 2009 by 8 percent to counter higher commodity expenses, Chief Financial Officer Don Mulligan said in a telephone interview. PepsiCo Inc., the world’s second-largest soda maker, has either added weight to some products or increased incentives in the U.S. to avoid cutting prices as input costs fall, Chief Executive Officer Indra Nooyi said in an interview July 8. “Wherever it makes sense we’ve either taken pricing down or increased the number of promotions we do on the products in order to give consumers the right price,” Nooyi said. PepsiCo is based in Purchase, New York.

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