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Daily Global Commentary

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Import Prices Post New Highs in April

Tue, May 13 2008, 20:35 GMT
by Asha Bangalore

Northern Trust

Import Prices Post New Highs in April

The import price index increased 1.8% in April vs. a 2.9% jump in the prior month. The sharp gain in April reflects rising energy prices and higher prices for non-petroleum imports excluding fuel. On a year-to-year basis, the 15.4% increase of the import price index in April is the largest seen since record keeping began in 1982.

Import prices excluding fuel moved up 1.00% in April, following a similar gain in March. During the twelve months ended April, this import price index was up 5.8%, also the largest year-to-year increase in the short history of this series.

Among non-petroleum items, prices of imported consumer goods continue to advance (see chart 3) noticeably which is troubling for an inflation fighting Fed.

April Retail Sales – Decline in Auto Sales Is Important

Retail sales fell 0.2% in April following a 0.2% increase in the prior month. Excluding autos, retail sales rose 0.5% in April. Auto sales declined 2.8% in April. Unit auto sales, which are reflected in consumer spending in the GDP report, dropped to an annual rate of 14.46 million units from 15.3 million in March. If auto sales have to remain flat in the second quarter compared with the first quarter, sales of autos would have to average a 16.1 million pace in the May-June period. Year-to-date, auto sales have posted an average pace of 15.07 million units, implying that it is a tall order to expect a turn around in sales during May and June. This significant weakness in auto sales will play an important role in the final GDP tally. Also, the ICSC-UBS weekly retail sales surveys for the first two weeks of May show declines in sales of 0.1% and 1.0%, respectively. It is conceivable that consumer purchases will be substantially weaker in the second quarter compared with the 1.0% annualized gain seen in the first quarter. In April, sales of gasoline (-0.4%) dropped but purchases of apparel (+7%), general merchandise (+0.5%), furniture (+0.1%) and building materials (+1.9%) advanced.

Small Businesses Remain Gloomy About the Near Term

The NFIB survey for April shows a mild improvement in the outlook of small businesses but the level remains consistent with readings seen during recessions (see chart 5). The Small Business Optimism Index rose to 91.5 in April from 89.6 in March.

Expectations of sales in the next six months matched the response in March but was the lowest since October 2001.

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Published on  Tue, May 13 2008, 20:38 GMT