U.S. February import prices surge on higher oil costs Filed: 03/15/2000

By Monee Fields-White c.2000 Bloomberg News

Washington, March 15 (Bloomberg)  Surging oil costs caused prices of imported goods to rise in February at their fastest pace in more than nine years, raising the prospect of accelerating inflation.

The import price index, a gauge of what U.S. businesses pay for foreign goods and raw materials, increased 1.9 percent last month after a revised gain of 0.3 percent in January, the Labor Department reported. Excluding petroleum, import prices rose 0.3 percent last month after falling 0.1 percent the month before.

The February gain in import prices was the largest since they rose 2.9 percent in October 1990. A 13.9 percent rise in petroleum costs, the most since April 1999, paced the increase. There were further signs of price pressures in the report, analysts said.

"It's not just energy," said Tim McGee, chief economist at Tokai Bank Ltd. in New York. "Inflation pressures have been intensifying. It is something to worry about with a boom going on in the economy."

One sign of inflationary pressures is prices excluding petroleum. The gain of 0.1 percent between February 1999 and February 2000 was the first year-over-year increase since March 1996. The price of goods from Canada, the largest U.S. trading partner, gained 2 percent for the largest increase since the government began publishing monthly numbers in October 1992.

Analysts surveyed by Bloomberg News had expected import prices to rise 0.6 percent during the month after what had previously been reported as a 0.1 percent increase in January.

Other Reports

The U.S. trade deficit in goods, services and investments widened to a record in the fourth quarter of 1999 and all of last year, the Commerce Department reported separately. The shortfall grew to $99.8 billion in the final three months of the year from $89.1 billion in the third quarter. For all of last year, the gap grew to a record $338.9 billion, equal to about 3.7 percent of gross domestic product.

Separately, the Federal Reserve said industrial production rose 0.3 percent in February after surging 1.1 percent in January. And the Commerce Department reported that business sales outpaced inventory growth in January, holding stockpiles to their leanest on record. Sales rose 0.8 percent, while inventories grew 0.5 percent. The inventory-sales ratio, which measures the time goods sit unsold, fell to a record-low 1.31 months.

The 10-year Treasury note rose was unchanged, with its yield holding at 6.29 percent.

Imported petroleum prices were up 168.4 percent over the past 12 months, the biggest year-over-year gain since the Labor Department began tracking these figures in 1983. Oil prices had fallen 27 percent in the year that ended February 1999.

For the 12 months ended last month, all import prices increased 9 percent, compared with a 3.9 percent decrease for the 12 months endeding February 1999. Import prices excluding petroleum had fallen 2.2 percent in that period.

Crude Doubles

Crude oil prices have more than doubled in the past year following agreements by the Organization of Petroleum Exporting Countries and other producers to eliminate a global surplus by reducing output. Crude oil rose to a nine-year high of more than $34 a barrel last week on the New York Mercantile Exchange, and has stayed near that level as traders await signs of whether OPEC will decide at its meeting next week to increase output.

Crude oil for April delivery fell 97 cents, or 3 percent, to $30.72 a barrel today on the New York Mercantile Exchange.

The U.S. dollar is beginning to stabilize and in some cases weaken against foreign currencies as global economies pick up momentum. And economists said today's report showed the impact of rebounding demand, especially for industrial supplies other than petroleum. Those include metals and paper products.

"This reflects a general strengthening of the world economy," said Peter Kretzmer, senior economist at Banc of America Securities in New York. Industrial supply prices other than petroleum rose 1.4 percent in February and were up 6.3 percent from a year earlier.

Other Details

Prices of U.S. products exported to other countries rose 0.5 percent last month  the largest increase since April 1996  after gaining 0.1 percent in January. Prices for agricultural exports increased 1 percent, while prices for non-agricultural exports rose 0.5 percent.

The Labor Department also reported prices for goods purchased from newly industrialized Asian countries fell 0.1 percent in February after a 0.1 percent decrease a month earlier. Prices for imports from Japan decreased 0.1 percent last month.

The price of imported goods from the European Union rose 0.2 percent last month, the Labor Department said.

The government also said prices paid for imported autos and parts increased 0.1 percent last month, while prices of imported consumer goods excluding automotive goods were unchanged. Prices for capital goods imports fell 0.1 percent during the month.

http://www.bakersfield.com/oil/i--1258994446.asp

-- Martin Thompson (mthom1927@aol.com), March 15, 2000