An index measuring the prices of goods imported to the U.S. was unchanged in May, reflecting cheaper computers and the biggest decline in automobile costs since 1992. Food and fuel prices rose.
Economists expected a 0.4 percent rise in the import price index after a revised 1.6 percent increase in April. Excluding petroleum, the gauge of costs for goods purchased from abroad decreased 0.1 percent, the Labor Department said. That was the third decline in the last five months and followed a 0.6 percent
increase.
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Cheaper imports help keep inflation tame in a recovering economy. Microsoft Corp. is one of many U.S. companies cutting prices to drum up demand because of increased competition from abroad.
“International and domestic competition remain very intense and that’s continuing to keep pressure on pricing power,” said Steve Wood, chief economist at FinancialOxygen Inc., a provider of financial services to banks, in Walnut Creek, California.
The prices of imported autos and parts fell 0.3 percent in May, the biggest decline since a 1.1 percent plunge in December 1992. The index of imported consumer goods excluding automobiles was unchanged in May after falling 0.1 percent in April. The last time that index increased was in March of last year, Labor
officials said.
Computers
Prices for capital goods and other business equipment fell 0.1 percent after rising 0.1 percent. Prices of electric generating equipment fell 0.4 percent in May.
The costs of imported computer equipment and office machines declined 0.6 percent in May after rising 0.2 percent. The prices of computers are 6.6 percent cheaper than they were in May of last year.
Imported building materials fell 1.3 percent in May and paper prices decreased 0.7 percent.
Petroleum prices rose 0.9 percent last month after surging 12.7 percent in April and 17 percent in March. After reaching a high of $29.36 a barrel in mid-May, the cost of crude oil fell to a two-month low of $24.15 a barrel on the New York Mercantile Exchange.
The decline comes as the International Energy Agency yesterday reduced its estimate for demand in the second half of this year, and nations that aren’t members of the Organization of Petroleum Exporting Countries boosted production.
Compared With Last Year
The cost of imported steel and iron fell 0.3 percent in May. Food prices increased 1.3 percent.
Overall prices of imported goods are down 3.8 percent from May 2001. Excluding petroleum, prices are down 3 percent from the same point last year. Competition from abroad explains the absence of pricing power for U.S. producers and has led to discounting.
Microsoft, the world’s largest software maker, last month said it reduced the U.S. price of its Xbox game console by more than a third, matching a cut by Tokyo-based Sony Corp. for its PlayStation 2.
Tame inflation has given Federal Reserve policy makers room to leave the overnight bank lending rate at a 40-year low of 1.75 percent, where it’s been since December.
The economy grew at a 5.6 percent annual rate in the first quarter, the fastest in two years, after growing at a 1.7 percent pace in the fourth quarter.
U.S. Dollar
“The expansion seems to be reasonably on track,” said Robert McTeer, president of the Dallas Fed. And because companies have been forced to compete internationally, “productivity gains have been indirectly related to the lack of pricing power, part of which comes from the strong dollar.”
Compared with a basket of currencies including the euro and the yen, the dollar has risen 24 percent over the last five years.
So far this year, the dollar is down about 1.5 percent.
Prices of U.S. products exported to other countries decreased 0.1 percent in May. Prices for agricultural exports fell 0.4 percent while prices for non-agricultural exports were unchanged.
By region, prices for goods from Japan fell 0.1 percent last month. Prices of European Union goods rose 0.3 percent, and prices of Canadian goods were unchanged. Prices of goods from Latin America rose 1.5 percent.
The government’s import price statistics are not seasonally adjusted, meaning there is typically little correlation between the import prices index and the Labor Department’s indexes of producer and consumer prices.
Bloomberg News
