Financial Options

The inflation specter reared its ugly head today as the Bureau of Labor Statistics reported that US import prices rose 0.8 percent in August, with a 2.3 percent increase in petroleum prices adding to a 0.5 increase in nonpetroleum imports. Export prices also increased for the second consecutive month in August rising 0.4 percent.

Also today, the Commerce Department reported that retail sales in August 2006 were up 0.2% to $368.2 billion, an increase of 6.7% from August 2005. Retail sales excluding automobiles rose 0.2% to $291.8 billion, up 7.5% from one year ago.

The Commerce Department also reported that manufacturing and trade sales increased 0.6% to $1,067.7 billion in July an 8.1% increase from July 2005. Inventories rose 0.6%. The inventory-sales ratio rose from 1.26 to 1.27, a very slight easing in inflationary pressures.

import prices,export prices,retail sales,manufacturing sales,inventory-to-sales ratio

U.S. IMPORT AND EXPORT PRICE INDEXES
- AUGUST 2006 -

The U.S. Import Price Index rose 0.8 percent in August, the Bureau of
Labor Statistics of the U.S. Department of Labor reported today. The August
increase was led by a 2.3 percent advance in petroleum prices, although a 0.5
percent rise in nonpetroleum prices was also a contributing factor. Export
prices increased 0.4 percent for the second consecutive month in August.

Percent changes in import and export price indexes
by End Use category
-not seasonally adjusted-

IMPORTS EXPORTS

Month Non- Agri- Nonagri-
All Petroleum petroleum All cultural cultural
Imports Imports Imports Exports Exports Exports

2005
August 1.4 7.4 0.1 -0.2 -0.6 -0.1
September 2.1 6.9 0.9 0.8 -1.4 1.0
October 0.1 -3.1 1.0 0.7 0.3 0.8
November -1.9 -9.4 -0.1 -0.6 -0.2 -0.7
December 0.0 -0.3 0.0 0.1 -0.5 0.2

2006
January 1.2 5.8 0.3 0.7 0.6 0.7
February -0.8 -1.0 -0.7 0.1 -0.7 0.2
March -0.1 0.6 -0.3 0.2 -0.1 0.2
April 2.1 11.3 0.1 0.7 -0.4 0.7
May 1.8 6.4 0.7 0.7 r 0.6 0.7
June 0.1 r -1.1 r 0.4 0.7 2.5 0.6 r
July 1.0 r 5.1 r 0.0 r 0.4 1.9 0.3 r
August 0.8 2.3 0.5 0.4 1.0 0.4

August 2004-05 8.2 45.4 1.9 3.1 6.7 2.8
August 2005-06 6.6 24.3 2.7 5.2 3.5 5.3

r = revised to reflect late reports and corrections by respondents.

Import Goods

Import prices increased 0.8 percent in August, compared to a 1.0
percent rise in July. Petroleum prices rose 2.3 percent in August, and were up
25.9 percent over the past five months. Nonpetroleum prices also increased in
August, rising 0.5 percent. For the year ended in August, prices for
nonpetroleum imports rose 2.7 percent while overall import prices advanced
6.6 percent.

The August increase in nonpetroleum prices was led by a 1.8 percent
rise in the price index for nonpetroleum industrial supplies and materials,
which resumed an upward trend following a 0.9 percent downturn in July. The
index increased 11.4 percent over the past 12 months. The August increase in
nonpetroleum industrial supplies and materials prices was driven by higher
natural gas and unfinished metals prices which more than offset declining
prices for chemicals and building materials. A 2.5 percent advance in foods,
feeds, and beverages prices in August also contributed to the rise in
nonpetroleum prices. The increase was the largest one-month jump in the
index since March 2005, and prices for foods, feeds, and beverages rose 6.0
percent over the past year.

Price indexes for each of the major finished goods areas recorded little
movement in August. Capital goods prices rose a modest 0.1 percent while the
price indexes for consumer goods and automotive vehicles were both
unchanged. For the August 2005-2006 period, consumer goods prices and
prices for automotive vehicles increased, up 0.7 percent and 0.6 percent,
respectively, while capital goods prices decreased 0.3 percent.

Export Goods

Export prices rose 0.4 percent in August as higher prices for both
agricultural exports and nonagricultural exports contributed to the increase.
Prices for agricultural exports advanced for the fourth consecutive month,
rising 1.0 percent in August. Higher prices for cotton, corn, and other
agricultural foods more than offset lower wheat and soybean prices. Led by
the increases in the past four months, agricultural prices rose 3.5 percent for
the year ended in August. Nonagricultural prices continued a steady upward
trend, rising 0.4 percent in August and 5.3 percent over the past 12 months.
Overall export prices advanced a similar 5.2 percent for the year ended in
August.

The August increase in nonagricultural prices was mostly driven by a
1.5 percent advance in the price index for nonagricultural industrial supplies
and materials, which was attributable to higher prices for metals, fuels, and
chemicals. Nonagricultural industrial supplies and materials prices rose 15.4
percent for the year ended in August. A 0.2 percent increase in consumer
goods prices also contributed to the August rise in nonagricultural prices.
Prices for consumer goods advanced 2.4 percent over the past year.

In contrast, capital goods prices fell 0.3 percent in August as prices for
computers, peripherals, and semi-conductors declined 1.8 percent. Excluding
computers, capital goods prices rose 0.2 percent. Despite the August decline,
overall capital goods prices increased 0.5 percent over the past 12 months.

The price index for automotive vehicles was unchanged in August and up 1.4
percent for the August 2005-2006 period.

Imports by Locality of Origin

Import prices from Canada and from Mexico both rose 1.7 percent in
August. In each case, the increase was led by higher fuel prices. The price
index for imports from Canada rose 8.3 percent for the year ended in August,
while prices for imports from Mexico increased 9.5 percent over the same
period.

Prices for imports from Japan and from China also advanced in August,
each rising 0.1 percent for the month. The upturn in import prices from Japan
partially offset a 0.2 percent decrease in July, although the index was down 1.3
percent over the past 12 months. Import prices from China recorded a second
consecutive 0.1 percent increase after trending downward over most of the past
year. The index declined 1.0 percent over the August 2005-2006 period.

The price index for imports from the European Union was unchanged
in August after rising in each of the previous three months. Prices for imports
from the European Union increased 5.9 percent over the past year.

Import and Export Services

Import air passenger fares declined 0.8 percent in August, the first monthly
decrease for the index since February. Despite the August decrease, import air
passenger fares rose 5.6 percent over the past year. In contrast, export air
passenger fares increased 5.2 percent for the second consecutive month. The
August rise was driven by a sharp advance in Japanese fares. Notwithstanding
the recent increases, overall export air passenger fares fell 0.5 percent for the
year ended in August.

The price indexes for import air freight and export air freight moved in
opposite directions in August, declining 0.7 percent in the case of import air
freight prices while prices for export air freight increased 0.9 percent. The
August movement for both indexes followed declines in July.

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ADVANCE MONTHLY SALES FOR RETAIL TRADE AND FOOD SERVICES: August 2006

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $368.2 billion, an increase of 0.2 percent (±0.7%)* from the previous month and up 6.7 percent (±0.7%) from August 2005. Total sales for the June through August 2006 period were up 5.6 percent (±0.5%) from the same period a year ago. The June to July 2006 percent change was unrevised from +1.4 percent (± 0.3%).

Retail trade sales were up 0.2 percent (±0.7%)* from July and were 6.6 percent (±0.8%) above last year. Nonstore retailers were up 12.5 percent (±4.5%) from August 2005 and sales of gasoline stations were up 11.0 percent (±2.0%) from last year.

MANUFACTURING AND TRADE INVENTORIES AND SALES: JULY 2006

Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers’ shipments for July, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,067.7 billion, up 0.6 percent (±0.2%) from June and up 8.1 percent (±0.3%) from July 2005.

Inventories. Manufacturers’ and trade inventories adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,347.3 billion, up 0.6 percent (±0.1%) from June and up 7.4 percent (±0.4%) from July 2005.

Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of July was 1.26. The July 2005 ratio was 1.27.