Washington, March 13 (Bloomberg) -- Prices of goods imported to the U.S. rose in February for a third straight month, led by a surge in oil prices, government figures showed. The import price index gained 1.3 percent last month after jumping 1.6 percent in January, the most in nine months, the Labor Department said. Excluding petroleum, the index increased 0.4 percent, the most since April, after rising 0.3 percent. The threat of war in Iraq and a strike in Venezuela have pushed prices for Brent crude, the benchmark for two-thirds of the world's oil, up by 40 percent over the past year to more than $33 a barrel. That has countered low inflation in other products and raw materials as excess capacity has forced companies such as Toyota Motor Corp. to hold prices down on imported goods. ``Thanks to rising commodity prices, mostly, we are seeing a substantial increase'' in inflation in the supply chain that hasn't reached consumers yet, said Sherry Cooper, chief economist at BMO Nesbitt Burns in Toronto, before the report. ``I'm not worried about runaway inflation, but I think the days of being concerned about a deflationary spiral are limited.'' With the exception of petroleum prices, there is little sign of inflation in the U.S. economy. That leaves the Federal Reserve free to further reduce its benchmark interest rate target next week, as some economists suggested it may do after the economy stumbled last month. Manufacturing slowed, consumer confidence fell to a nine-year low and the economy lost 308,000 jobs. The import price report is the first of three inflation measures for February. Prices paid to producers, to be reported Friday, probably rose 0.6 percent last month after a 1.6 percent gain in January, based on a Bloomberg News survey of economists. The consumer price index, due out a week later, probably jumped 0.5 percent after increasing 0.3 percent, the survey found.
Oil Prices Up 75% in 12 Months
Economists expected February import prices to rise 1 percent in February, based on the median of 33 economists in a Bloomberg survey. The import price index isn't seasonally adjusted and has little correlation with the producer and consumer price measurements, which are adjusted for seasonal irregularities. Imports excluding oil last month cost 1.6 percent more than in February 2002. The cost of imported petroleum jumped 8.2 percent last month after increasing 13.3 percent in January, today's report showed. Imported oil prices were 75 percent higher over the 12 months ended in February, the biggest year-over-year gain since the 12 months ended in February 2000. The price of Brent crude reached $34.93 a barrel last Friday, the highest since $36.79 in September 2000. Oil prices have since eased as members of the Organization of Petroleum Exporting Countries pledged earlier this week to make up for any production loss caused by a U.S. attack on Iraq. Today the price was $33.54.
Capital, Computer Equipment
The costs of imported capital equipment rose 0.1 percent after declining 0.1 percent a month earlier. Prices for imported computer equipment and other office machinery fell 0.6 percent in February and were down 5.6 percent for the past 12 months. Taiwan Semiconductor Manufacturing Co., the world's largest supplier of made-to-order computer chips, forecast in January that the average selling price of its chips would fall by about 7 percent in the first quarter as demand slumps. Food prices declined 0.7 percent last month, the largest drop since June, after rising 0.8 percent in January. Prices of imported autos and parts climbed 0.1 percent in February following a 0.2 percent decline the previous month. The index of imported consumer goods excluding automobiles jumped 0.1 percent for the third straight month. The absence of much inflation has allowed Federal Reserve policy makers to keep the benchmark overnight bank lending rate at a four-decade low of 1.25 percent since November. Traders are betting the Fed will trim the overnight rate, or the federal funds rate, by a quarter percentage point to 1 percent by May, based on the yield on the fed-funds futures contract for that month.
Fed Rate Cut?
Economists at Merrill Lynch & Co., J.P. Morgan Chase and HSBC Securities, three of the 22 primary bond dealers that trade directly with the central bank, forecast a rate cut when the Fed's Open Market Committee meets Tuesday. Prices of U.S. products exported to other countries rose 0.4 percent in February, matching the January increase. Prices for agricultural exports fell 0.6 percent, while prices for non- agricultural exports gained 0.5 percent. U.S. exports have been aided by a weaker dollar. The dollar has fallen 26 percent against the euro and 9 percent against the yen in a year, making American goods less expensive relative to European and Japanese products. By region, prices for goods imported from Japan gained 0.3 percent last month after holding steady in January. Prices of European Union goods jumped 2.2 percent after a 0.6 percent increase. Prices of goods from Canada, the largest U.S. trading partner, climbed 1.6 percent after rising 2.2 percent in January. Prices of goods from Latin America increased 2.7 percent after a gain of 2.8 percent. //www.quote.bloomberg.com