- The Washington Times - Tuesday, January 14, 2003

WASHINGTON, Jan. 14 (UPI) — Rising oil prices helped push the price of goods imported into the United States 0.7 percent higher during December, the Labor Department said Tuesday.

Economists on Wall Street were expecting the prices of goods imported into the country to rise 0.7 percent during the month after falling 1 percent during November.

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

The government agency said, excluding petroleum, the gauge of the costs of goods and raw materials from abroad rose 0.1 percent after slipping 0.1 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. The data can directly affect the financial markets. The bond market is especially sensitive to the risk of importing inflation because it erodes the value of 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 government agency said the cost of imported petroleum surged 7.4 percent last month, the largest gain since April, after declining 9.2 percent in November. The report showed the price of industrial supplies excluding petroleum rose 0.3 percent in December after rising 0.3 percent in November.

The costs of imported capital equipment declined 0.1 percent, the same as in November.

Prices of imported computer equipment and other office machinery fell 0.5 percent in December while imported foods and beverages costs rose 0.5 percent.

Prices for imported autos and parts rose 0.1 percent last month after no change the month earlier.

Imported consumer goods prices other than automobiles were unchanged in December after falling 0.1 percent the previous month.

The report showed prices of U.S. products exported to other countries fell 0.2 percent in December after rising 0.1 percent a month earlier.

Prices for agricultural exports dropped 0.6 percent while costs for non-agricultural exports declined 0.1 percent.

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