Driven by a weaker dollar and much higher prices for petroleum and natural gas, import prices surged 2.7% in November, the largest monthly increase in 17 years, the Labor Department reported Wednesday.
Even excluding fuels, import prices rose 0.5%.
Import prices have now risen 11.4% in the past year, the largest gain in the 25-year history of the import price index.
The FED has lost control! This will be the new "conundrum"...
how can those numbers (all 3) be so small in 98!? The country isn't THAT different then vs now.
From $5b a month deficit ex-petrol to $30b a month ex-petrol.
Let me remind everyone that Ben Bernanke said that a falling dollar and increasing import prices do NOT affect those US consumers that do not buy anything imported (around 5:25):
If you do not eat, drink, drive a car, buy anything made of plastic, or use electricity then these increases should not affect you. I hope that you can sleep better now.
So no tariffs necessary for those imports afterall...the invisible hand at work, yes?...at work trying to find spare change as inventories build is how it looks to me.
Good. Doesn't this have to happen. If this nice relatively gradual trend continues and exports remain relatively strong maybe will will avoid a full on economic catastrophe.
--
"The ex-petroleum deficit is falling fairly rapidly, almost entirely because of weak imports"
That is because the US economy had already entered recession in October! You guys dont get it, do you?
Remember that the "aggregate demand" is necessary to grow for the economy to grow and to keep inflation above the Fed target of 1%? Well, inflation is the laggiest of the lagging indictor and it will take time to go negative (by 2008Q3-Q4) but the deflationary depression is in the works.
. . . maybe [we] will avoid a full on economic catastrophe.
Only if we wean ourselves off imported oil.
We've known about the problem for years, but all the former Congress could do was pass tax cuts for the industry and the current Congress is frozen in a partisan lockdown.
crispy&cole, this is just the October report (the trade reports are always delayed). My guess is trade will have a positive impact on Q4 GDP - as imports slow in November and December.
I expect falling equity extraction to impact imports in Nov and Dec.
What is the expected impact on 4th qtr GDP?
crispy&cole
Purely mechanically, I calculate it this way - the average revised deficit for Q3 was 57.6B so if this OCTOBER number of 57.8 holds for the next two months then that's a .2/57 *100 percent increase in the deficit quarter to quarter - which annualized crudely( x 4 ) looks like a NOMINAL 1% decrease in the GDP. Then you have to do their deflator shit..
Its a lot of hocus pocus to me - I dislike this annualizing of very small numbers..
Anyway, that's what I'd come up with with regard to the impact on the NOMINAL ( not real ) GDP for Q4.
Weak dollar reduces imports, and shrinks foreign investment (CA=KA after all). Wal-Mart cuts jobs, and now all those people who were Wal-Mart greeters now get to work in factories making the crap Wal-Mart sells. Exchange rates bring all the much lauded manufacturing and outsourced jobs we have lost back. Government borrowing will become more difficult as the weakening dollar requires higher returns.
The PPI data showed far small energy price gains in October than did the import price data. Now, import price data rose strongly in November. There is a far chance that November PPI will pick up most of the the imported energy price gains from both months. Headline PPI could be a tremendous stinker tomorrow.
A picayune point, if I may: The chart is mislabeled. If the chart is labeled as showing a trade deficit, then a deficit should be shown as positive numbers. If you want to show negative numbers, you should label it a trade balance.
"wow thats a whole lot of plastic crap from china!"
That is a dangerous misunderstanding. China is now capable of producing components of Boeing & Airbus's Jumbojets. In ten years, they will be making the Jets themselves. It is rapidly becoming a technologically advanced nation. (They are sending a rocket to moon, BTW)
And it simply doesn't make sense for most US companies to do production in US. With lower costs and/or higher quality, practically anything that can be shipped will be made abroad. We will become a purely non-importable service economy.
Perhaps you might look into how much of the deficit with China actually goes to US multinationals operating there (or joint ventures.
While you are at it look at the mechanisms they use to transfer profits to low tax locations while operating at a loss here at home.
Export prices steady; import prices rising fast; dollar dropping. This is the beginning of the process to shrink the US balance of trade deficit. I recall some here pooh-poohing my statement that a weaker dollar was what was needed to readjust our external trade balance. I wonder if they still are ignorant enough to keep pooh poohing the obvious.
Perhaps I need to spell it out. A weaker dollar reduces imports since imports are more expensive and stimulates exports since our prices are cheaper for others. Get it?
great
What is the expected impact on 4th qtr GDP?
CR, can you clarify that 11.4% for the past year.
Is that with or without oil?
Thx
Driven by a weaker dollar and much higher prices for petroleum and natural gas, import prices surged 2.7% in November, the largest monthly increase in 17 years, the Labor Department reported Wednesday.
Even excluding fuels, import prices rose 0.5%.
Import prices have now risen 11.4% in the past year, the largest gain in the 25-year history of the import price index.
The FED has lost control! This will be the new "conundrum"...
So when will the recession/depression be official?
LIBOR rates ($ rates) are down 15-20 bps across the board today...
how can those numbers (all 3) be so small in 98!? The country isn't THAT different then vs now.
From $5b a month deficit ex-petrol to $30b a month ex-petrol.
wow thats a whole lot of plastic crap from china!
Let me remind everyone that Ben Bernanke said that a falling dollar and increasing import prices do NOT affect those US consumers that do not buy anything imported (around 5:25):
YouTube -
If you do not eat, drink, drive a car, buy anything made of plastic, or use electricity then these increases should not affect you. I hope that you can sleep better now.
So no tariffs necessary for those imports afterall...the invisible hand at work, yes?...at work trying to find spare change as inventories build is how it looks to me.
Good. Doesn't this have to happen. If this nice relatively gradual trend continues and exports remain relatively strong maybe will will avoid a full on economic catastrophe.
Am I the only one that thinks the red and black lines need to be swapped?
--
"The ex-petroleum deficit is falling fairly rapidly, almost entirely because of weak imports"
That is because the US economy had already entered recession in October! You guys dont get it, do you?
Remember that the "aggregate demand" is necessary to grow for the economy to grow and to keep inflation above the Fed target of 1%? Well, inflation is the laggiest of the lagging indictor and it will take time to go negative (by 2008Q3-Q4) but the deflationary depression is in the works.
Jas
. . . maybe [we] will avoid a full on economic catastrophe.
Only if we wean ourselves off imported oil.
We've known about the problem for years, but all the former Congress could do was pass tax cuts for the industry and the current Congress is frozen in a partisan lockdown.
John Cleary, with oil.
crispy&cole, this is just the October report (the trade reports are always delayed). My guess is trade will have a positive impact on Q4 GDP - as imports slow in November and December.
I expect falling equity extraction to impact imports in Nov and Dec.
Best Wishes
What is the expected impact on 4th qtr GDP?
crispy&cole
Purely mechanically, I calculate it this way - the average revised deficit for Q3 was 57.6B so if this OCTOBER number of 57.8 holds for the next two months then that's a .2/57 *100 percent increase in the deficit quarter to quarter - which annualized crudely( x 4 ) looks like a NOMINAL 1% decrease in the GDP. Then you have to do their deflator shit..
Its a lot of hocus pocus to me - I dislike this annualizing of very small numbers..
Anyway, that's what I'd come up with with regard to the impact on the NOMINAL ( not real ) GDP for Q4.
-K
re: CR's v my answer.
LOL !
So now I'll have to go and look at past seasonal variations in the export - imports over oct - dec !!!
So much data, so little time.
-K
Weak dollar reduces imports, and shrinks foreign investment (CA=KA after all). Wal-Mart cuts jobs, and now all those people who were Wal-Mart greeters now get to work in factories making the crap Wal-Mart sells. Exchange rates bring all the much lauded manufacturing and outsourced jobs we have lost back. Government borrowing will become more difficult as the weakening dollar requires higher returns.
Isn't this what everyone wanted?
The PPI data showed far small energy price gains in October than did the import price data. Now, import price data rose strongly in November. There is a far chance that November PPI will pick up most of the the imported energy price gains from both months. Headline PPI could be a tremendous stinker tomorrow.
A picayune point, if I may: The chart is mislabeled. If the chart is labeled as showing a trade deficit, then a deficit should be shown as positive numbers. If you want to show negative numbers, you should label it a trade balance.
I very much like your blog, by the way. Thanks!
"wow thats a whole lot of plastic crap from china!"
That is a dangerous misunderstanding. China is now capable of producing components of Boeing & Airbus's Jumbojets. In ten years, they will be making the Jets themselves. It is rapidly becoming a technologically advanced nation. (They are sending a rocket to moon, BTW)
And it simply doesn't make sense for most US companies to do production in US. With lower costs and/or higher quality, practically anything that can be shipped will be made abroad. We will become a purely non-importable service economy.
Perhaps you might look into how much of the deficit with China actually goes to US multinationals operating there (or joint ventures.
While you are at it look at the mechanisms they use to transfer profits to low tax locations while operating at a loss here at home.
Export prices steady; import prices rising fast; dollar dropping. This is the beginning of the process to shrink the US balance of trade deficit. I recall some here pooh-poohing my statement that a weaker dollar was what was needed to readjust our external trade balance. I wonder if they still are ignorant enough to keep pooh poohing the obvious.
Perhaps I need to spell it out. A weaker dollar reduces imports since imports are more expensive and stimulates exports since our prices are cheaper for others. Get it?
Thank you