Petroleum pushes US import prices up

Soaring petroleum costs pushed US import prices up sharply in August, government data showed yesterday, but other import prices remained very subdued in good news for the Federal Reserve as it monitors inflation.

Economists are also scrutinising data for evidence of how Hurricane Katrina has hurt US growth. But the Labour Department said the August survey was conducted before the storm struck and therefore was not affected.

The Labour Department said US import prices rose by 1.3 per cent last month, versus a Wall Street forecast for a 1.2 per cent gain. July's import price numbers were revised down to show a 0.8 per cent gain from 1.1 per cent previously reported.

Export prices fell 0.1 per cent, compared with forecasts for a 0.2 per cent increase and a 0.1 per cent rise in July.

The data serves as one of the early warning indicators of inflation and will worry the Federal Reserve if it thinks these cost pressures will subsequently show up in consumer prices.

But excluding petroleum, import prices were flat compared with a 0.2 per cent fall in July and have shown no increase since rising 0.4 per cent in April, the Labour Department said.

"The good news is that what we've seen is an unchanged reading for the non-petroleum items and it looks like what we're still seeing is lower prices for many consumer items," said Gary Thayer, chief economist at A.G. Edwards & Sons in St Louis.

"So it doesn't look like we have a major inflation problem outside of oil, which is good for the Fed," he said.

Over the last 12 months, import prices have risen 7.6 per cent, reflecting a 42.5 per cent rise in the cost of petroleum, which has challenged consumer spending power and raised concern at the US central bank about inflation.

"Excluding oil, prices are still contained. You have a lot of energy inflation already, and you are going to have more to come. You have a lot of refined products overseas. It's more expensive to refine overseas. We are going to see a pop next month," said Christopher Low, chief economist at FTN Financial in New York.

Stripping out petroleum, import prices are up just 1.8 per cent over the last 12 months. The Fed is monitoring the pass-through of energy prices into core measures of inflation and has said that while there has been some spill-over, long-term inflation expectations remain well-contained so far.

The cost of imported food and beverages fell 0.1 per cent in August while the cost of nonpetroleum industrial supplies was up just 0.2 per cent. Auto import prices were unchanged for the second straight month. Prices for capital goods also held steady, while the price of consumer goods, excluding autos, declined by 0.2 per cent. Many of these goods are imported from Asia, particularly China, and economists said that the fact the dollar's value has been kept artificially steady against these currencies by central bank intervention has helped hold prices down.

"If we'd had a substantial decline in the dollar against the Chinese currency we'd have probably seen a substantial rise in the price of some of the items that we buy from China," said Mr Thayer.