Thursday, May 13, the US Bureau of Labor Statistics released their U.S. IMPORT AND EXPORT PRICE INDEXES – APRIL 2010 finding U.S. import prices advanced 0.9 percent in April, following a 0.5 percent increase in March. Higher prices for fuel and nonfuel imports contributed to the overall advance. Prices for U.S. exports also increased in April, rising 1.2 percent after a 0.7 percent advance in March.
All Imports: The price index for U.S. imports increased 0.9 percent in April, continuing the upward trend of the past year. The April advance followed a 0.5 percent rise in March and approximately 55 percent of the increase was attributable to higher fuel prices. Import prices rose 11.1 percent over the past 12 months, similar to the 11.3 to 11.4 percent year-over-year increases recorded in each of the three previous months.
Fuel Imports: Fuel prices also continued to trend up in April, rising 2.3 percent after increasing 1.7 percent in March. The price index for import fuel jumped 54.3 percent for the year ended in April, partially reversing the 50.8 percent drop recorded for the April 2008-09 period. Both the April increase and the rise over the past 12 months were driven by higher petroleum prices which rose 3.3 percent in April and 58.7 percent over the past year. A 15.1 percent decline in natural gas prices, which followed a 14.2 percent decrease in March, partially offset the higher petroleum prices in April. Despite the downward movement of the past two months, natural gas prices advanced 15.0 percent over the past 12 months.
All Imports Excluding Fuel: Nonfuel import prices also contributed to the overall increase in import prices in April, rising 0.5 percent. The increase was driven by a 2.6 percent advance in nonfuel industrial supplies and materials prices, although higher prices for food and finished goods also contributed to the overall advance. The price index for nonfuel prices has not recorded a monthly decline since July 2009 and rose 3.2 percent for the year ended in April after falling 3.8 percent for the April 2008-09 period.
Next week, the U.S. Bureau of Labor Statistics will release the April Consumer Price Index data, which I expect will show trends similar to last week's Import and Export Price Indexes, which showed considerable increases in April over March, and year over year.
When I wrote about the state of the current economy, based on March CPI data - Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in March [1] - I observed:
Be concerned about fuel and energy costs in the coming several years - especially while we are in deep conflict in the Middle East and worldwide - as oil prices are expected to continue to trend upward for the foreseeable future and remain unstable and drive many other cost factors that may lead to inflation. High inflation, under current economic conditions, will cause extreme hardship to a high percentage of the world's people, and cause a nightmare in common people's current economic recovery dreaming.
People around the world need reasons to be confident in the economy, for the US and global economies to continue to show broad trends of recovery and transformation beyond the age of excess. Inflation will break the recovery's knees.
So far so good on the US inflation front, President Obama.
While "People around the world need reasons to be confident in the economy", in April, beyond continuing financial turmoil in Europe in particular, the world was confronted with a shock to our environmental and economic ecosystem that shakes the people's confidence in the future and so shall impact the global economy - Deepwater Horizon exploded, unleashing a gusher of 1,000,000s of gallons of oil and unmeasurable methane gas into the Gulf of Mexico and environment, still unchecked today.
Our global economy has barely awakened to the realities before us from this immense catastrophe [2], including the costs of the largest global environmental clean-up and containment in history, for long after this oil stops flowing (hopefully within the next few weeks... months?!?!).
Other associated costs shall include lost jobs and lost spending of those unemployed and overall in the areas impacted, for tourism, trade, retail, real estate and other lines of business. Obviously the cost is many $billions - how many?
Obviously, the world watches and ponders what this means for the future of the planet, and their families.
Obviously, government leaders are watching and realizing pollution is the greatest game changer and career killer of their lives, and they are knee deep in biohazards, and they need to change everything about global energy policy, and regulation of many industries that have operated nearly unconstrained by good science in the past.
Wall Street is watching as the US economy is one year into an unsteady, shallow recovery from a deep trough, and Americans cannot handle more shock to their confidence. Few in the nation seem inclined to fill-up the RV and hit the open roads, or yank out the credit card and buy some plastic. Now is a time to wait - ponder - change our lives for the better. That means choking the only engine the economy has for the current cycle of recovery, being consumer spending.
As US joblessness is remaining high and incomes are not growing in general, consumer spending will be especially restrained by inflation and expenses surging in highly inelastic sectors of the consumer life, like for gasoline, dairy, meat, fruit, vegetables, utilities, taxes and government, housing, interest, and education. In these tough economic times, rising prices for some or all of these factors will hurt regular people greatly.
Clearly the Gulf Oil disaster will concern the energy sector, as they will face costs from the disaster, increases in cost of business, and increased costs of regulatory compliance, worldwide - $billions more than already anticipated in times planning for "sustainability".
An era of environmentalism will shift spending and costs in significant ways. How that will be reflected in fuel prices to consumers is not yet clear but it is reasonable to expect overall costs to increase in the short term and into the foreseeable future - there are no silver linings for energy with this disaster.
Fuel costs have already been rising...
I recently wrote on realNEO: Ceridian reported today the Ceridian-UCLA Pulse of Commerce Index™ [3] (PCI) fell 0.3 percent in April, suggesting the economic recovery may have stalled. "The latest PCI numbers are disappointing and cast considerable doubt on the strength of the recovery and the strength of GDP numbers for 2010," said Ed Leamer, the PCI's chief economist.
From Ceridian: "What we are seeing with the PCI and hearing from our customers is that the economy is better than last year, but not great," said Craig Manson, senior vice president and index expert for Ceridian. "The economy appears to be in recovery, but the big question is by how much? The next two months will tell us a lot about the rest of the year."
Ed Leamer, the PCI's chief economist, reports "the next two months will tell if the first quarter's healthy consumer spending will help lift the PCI and propel stronger GDP growth for the year."
Ceridian reporting on the PCI made no mention of the Deepwater disaster, so that may not be interpreted into these numbers - May shall begin to reflect the impact... especially if increasing diesel prices squeeze an already contracting transportation sector, reflecting contraction in the US economy, BD... Before Deepwater.
PD - Post Deepwater - perhaps the best data to reflect world confidence to-date is the DJIA, which has not performed well since the realities of the disaster started becoming public, over the past two weeks. Most of the decline in the DJIA and other investment indexes is attributed to financial problems in Europe, but I believe Deepwater is what is actually most poisoning the global economic psyche right now.
Will this immense disaster have a lasting impact, driving significant changes in human beliefs that will herald a new era of "anti-consumer" behavior, forcing core dynamics of the global economy to realign? I believe so. The failure of GM was a pre-Deepwater example of the market power already in play, and I expect tidal waves of repercussions for industry and investors for many years to come, as humans begin caring about the Earth once more.
It will be a very exciting time for the world... this PD New Economy finally unfolding before us.... hopefully in time.
It will not be pretty and predictable for the U.S. and global economies in the short run... it will be ugly for polluters from now on... and what simple world citizens do going forward will save humanity from certain extinction, if we are successful.
I've been following all this with an economist's eye and will share what I see in the data as it is released to the public, as we enter the first year of what I consider to be the beginning of the real New Economy on Earth, being Post Deepwater and so beyond the age of environmental misinformation and denial.
So far, the global picture is better than one may expect. I attribute that to the strong leadership and global popularity of President Obama - the world has confidence he will clean-up this mess.
In reality, the clean-up will require the effort of millions.
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