- The Washington Times - Thursday, February 13, 2003

WASHINGTON, Feb. 13 (UPI) — The Labor Department said Thursday that the price of goods imported into the United States posted their largest rise during January in nine months due in part to a surge in oil prices.

The government agency said the import price index jumped 1.5 percent during the first month of 2003 — its largest increase since 1.6 percent rise posted back in April of 2002.

The index rose a revised 0.6 percent in December, which the Labor Department originally reported as rising 0.7 percent.

Most economists on Wall Street were expecting the prices of goods imported into the country to rise 0.8 percent during the month.

Imports, which account for about 15 percent of all goods and services purchased in the United States, rose 4.2 percent during all of 2002.

The government agency said excluding petroleum, the gauge of the costs of goods and raw materials from abroad rose 0.2 percent after rising the same 0.2 percent a month earlier.

The report measures the prices of goods that are bought in the United States but produced abroad and the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products.

Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar. The bond market is especially sensitive to the risk of importing inflation because it erodes the value of the principal (the original investment) which is paid back when the bond matures. It also decreases the value of the steady stream of interest rate payments on this type of security.

Inflation leads to higher interest rates and that's bad news for stocks, as well.

By monitoring inflation gauges such as import prices, investors can keep an eye on this menace to their portfolios.

The latest report from the government agency showed the cost of imported petroleum surged 12.4 percent after climbing 6.2 percent a month earlier.

The report showed the price of industrial supplies excluding petroleum rose 1.4 percent after rising 0.6 percent in December.

The costs of imported capital equipment eased 0.1 percent after declining the same 0.1 percent in December.

Prices of imported computer equipment and other office machinery decline 0.4 percent after falling 0.5 percent in December while imported foods and beverages costs rose 0.7 percent after rising 0.2 percent during the previous month.

Prices for imported autos and parts slipped 0.2 percent after rising 0.1 percent a month earlier.

Imported consumer goods prices other than automobiles rose 0.2 percent after rising 0.1 percent in December.

The report also showed prices of U.S. products exported to other countries rose 0.4 percent after falling 0.2 percent in December and the prices for agricultural exports rose 0.2 percent after dropping 0.6 percent a month earlier.

Costs for non-agricultural exports rose 0.4 percent after declining 0.1 percent in December, the government said.

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