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The U.S. Import Price Index fell 2.1 percent and the Export Price Index fell 0.5 percent in September 2006, according to the Bureau of Labor Statistics. The decline in import prices included a 10.3 percent drop in petroleum prices with nonpetroleum prices actually rising 0.1 percent.

The modest increase in import prices should help ease Fed concern with core inflation while the drop in petroleum prices should help alleviate concerns that high energy prices will trickle through to other areas. With import prices up slightly and export prices dropping, prices should contribute to a narrowing of the record trade deficit, while lower prices generally should help the increase in total trade to continue.

international trade,export prices,import prices,exports,imports

U.S. IMPORT AND EXPORT PRICE INDEXES: SEPTEMBER 2006

The U.S. Import Price Index fell 2.1 percent in September, the Bureau
of Labor Statistics of the U.S. Department of Labor reported today. The
decline was the first in six months and was driven by a 10.3 percent drop in
petroleum prices. Export prices decreased 0.5 percent in September, the first
decline for the index since November 2005.

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
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 0.6 0.7
June 0.1 -1.1 0.4 0.7 2.6 r 0.6
July 0.8 r 3.9 r 0.1 r 0.4 1.9 0.2 r
August 0.8 2.1 r 0.5 0.4 0.9 r 0.5 r
September -2.1 -10.3 0.1 -0.5 -0.7 -0.5

September 2004-05 9.9 50.4 2.7 3.6 3.3 3.6
September 2005-06 2.0 2.9 2.0 3.7 4.4 3.7

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

Import Goods

Prices for overall imports fell 2.1 percent in September, the largest one-
month decrease in the index since a 3.1 percent drop in April 2003. The
decline was led by a 10.3 percent decrease in petroleum prices, which had been
up in five of the previous six months. The September decrease in petroleum
prices was the largest monthly drop since the index fell 11.4 percent in
December 2004. In contrast, nonpetroleum prices edged up 0.1 percent in
September, the sixth consecutive month the index increased. For the year
ended in September, the price index for nonpetroleum imports rose 2.0 percent,
the same increase as overall import prices for the September 2005-2006 period.

The modest September increase in nonpetroleum prices was primarily
driven by a 0.4 percent advance in prices for nonpetroleum industrial supplies
and materials. A 3.1 percent increase in unfinished metals prices led the
advance in prices for nonpetroleum industrial supplies and materials, with
higher prices for building materials and textile supplies also contributing.
Partially offsetting those increases were decreasing prices for natural gas and
chemicals. The price index for nonpetroleum industrial supplies and materials
rose 6.6 percent over the past 12 months. Prices for foods, feeds, and
beverages also increased, up 0.4 percent in September and 6.3 percent over the
past year.

More modest increases in the price indexes for consumer goods and
automotive vehicles also contributed to the September advance in
nonpetroleum prices. Consumer goods prices and prices for automotive
vehicles each advanced 0.1 percent for the month, and 0.9 percent and 0.6
percent for the year ended in September, respectively.

The price index for capital goods was unchanged in September and declined
0.2 percent over the past 12 months.

Export Goods

Export prices fell 0.5 percent in September as a 0.7 percent decrease in
agricultural prices and a 0.5 percent drop in the price index for nonagricultural
goods each factored into the decline. The September drop in export prices was
the first in 10 months and followed increases of 0.4 percent the previous two
months. The decline in agricultural prices followed increases in each of the
four previous months as lower prices for soybeans, vegetables, and cotton all
contributed to the decrease. Despite the drop, agricultural prices increased 4.4
percent for the year ended in September. Nonagricultural prices also rose over
the past 12 months, advancing 3.7 percent for the period.

The September decrease in nonagricultural prices was led by a 1.8
percent decline in the price index for nonagricultural industrial supplies and
materials. Nonagricultural industrial supplies and materials prices were driven
by a sharp decline in fuel prices, with lower chemicals prices also contributing
to the decrease. In contrast, metal prices continued to rise. Prices for
nonagricultural supplies and materials rose 9.5 percent over the past year.

Prices for the major finished goods areas were either up or unchanged in
September. The price indexes for consumer goods and automotive vehicles
each rose 0.1 percent in September, and increased 2.1 percent and 1.4 percent
for the September 2005-2006 period, respectively. Capital goods prices were
unchanged in September, although excluding computer prices, prices for
capital goods advanced 0.1 percent. The price index for overall capital goods
rose 0.7 percent for the year ended in September.

Imports by Locality of Origin

The price indexes for imports from Canada and from Mexico decreased
in September, declining 2.0 percent and 2.5 percent, respectively. In each
case, a downturn in fuel prices drove the decrease. Despite the September
declines, prices for imports from Canada advanced 1.9 percent over the past
year, while prices for imports from Mexico rose 6.2 percent.

Prices for imports from the European Union edged down 0.1 percent in
September, also led by lower fuel prices. The price index for imports from the
European Union increased 4.1 percent over the past year.

Prices for imports from China and from Japan also fell in September.
The 0.2 percent decline in the prices for imports from China followed increases
in the previous two months. The price index for imports from Japan fell 0.1
percent for the third consecutive month. For the year ended in September,
prices for imports from China declined 1.0 percent while prices for imports
from Japan fell 1.5 percent.

Import and Export Services

Both import and export air passenger fares declined in September, led by
seasonal drops in European and Asian fares. Import air passenger fares
decreased 5.4 percent, while export air passenger fares fell 7.6 percent.
Despite the decreases, the price indexes for import and export air passenger
fares rose for the year ended in September, up 5.6 percent and 2.1 percent,
respectively.

Import air freight prices increased 0.5 percent in September after declining in
each of the previous two months. A 1.4 percent advance in European air
freight prices led the increase. The price index for export air freight prices
increased 1.4 percent in September and 6.6 percent over the past year.

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