In 2003, overall U.S. import and export prices increased for the second consecutive year. (1) Prices for imports rose 2.4 percent, following a 4.2-percent rise in 2002, while export prices gained 2.2 percent, up from a 1.0-percent rise in 2002. During 2001-03, U.S. economic indicators for prices suggested a marked slowdown in inflationary pressures, and in May of 2003, the Federal Reserve Board expressed concern over the possibility of an "unwelcome substantial fall" in inflation. (2) Nevertheless, prices for agricultural and petroleum products--traditionally volatile price components--strengthened along with prices for other raw materials during 2003 to bring about overall gains for the year. However, the increases in prices for these two commodity areas, along with the depreciation of the U.S. dollar against many major foreign currencies, did not appear to have a significant impact on prices for imported finished goods.
Prices for imported petroleum and petroleum products led to the overall growth in import prices, but the 12.8-percent increase in the petroleum index was up far less than the sharp increase of 56.9 percent in 2002. The increase in the index for all imports excluding petroleum accelerated in 2003, rising 1.2 percent, compared with a modest 0.3-percent advance the previous year, as nearly all major categories of imports recorded price increases in 2003. The U.S. dollar's depreciation against many major currencies appeared to have a small impact on the 2003 increases in prices for imported finished goods.
Agricultural and nonagricultural export prices both increased in 2003 by larger amounts than in 2002, triggering the largest gain in the overall export price index since 1995. Over the past year, agricultural export prices jumped 13.4 percent, while nonagricultural commodities prices, led primarily by increases in prices for raw materials, were up 1.3 percent. Both components marked their largest December-to-December increase in the index since 1995. Automotive and consumer goods prices also increased in 2003, while the index for the capital-goods component posted its eighth consecutive annual decline. (See table 1.)
Other price measures
The Bureau of Labor Statistics produces various price indexes that measure different aspects of inflation in product markets: import and export price indexes, which measure the change in the prices of imports and exports of nonmilitary goods exchanged between the United States and the rest of the world; the Consumer Price Index, which measures inflation as experienced by consumers in their day-to-day living; and the Producer Price Indexes, which are a family of indexes that measure changes in the selling prices received by domestic producers of goods and services at various stages of processing. The Consumer Price Index for All Urban Consumers (CPI-U) rose 1.9 percent in 2003, a slowdown from its 2.4-percent advance in 2002. The core CPI-U, which excludes energy and food prices, increased 1.1 percent in 2003, less than the 1.9-percent rise in 2002 and the 2.7-percent increase in 2001. Smaller increases in prices for shelter costs, motor vehicle insurance, and medical care, coupled with declines in prices for cigarettes and used cars, contributed to the increase in 2003.
The Producer Price Index (PPI) for finished goods increased 4.0 percent in 2003, following a 1.2-percent rise in 2002. Excluding food and energy prices, the PPI for finished goods was up 1.0 percent, and the PPI for intermediate materials was up 2.1 percent, in 2003. Prices for crude nonfood materials less energy increased 20.8 percent over the year. (See chart 1.)
Import price trends
Energy. Following a 56.9-percent spike in 2002, the index for petroleum and related products rose 12.8 percent in 2003, driven largely by a 12.0-percent increase in crude-oil prices. Tight world crude-oil supplies and geopolitical …