The NYT badly misrepresented the release of data on import prices for September. It told readers that, "in one good sign for the domestic economy, prices of nonenergy imports rose only 0.3 percent last month, a sign that the risk of inflation may be contained." That may not sound like much, but until recently non-energy import prices had been flat or even falling. The index for non-fuel imports stands at 110.0 against a 2001 base. That means that in over six years the index has risen by just 10 percent, an average of 1.6 percent a year. Against this backdrop, a monthly rise of 0.3 percent (@3.6 percent annually) is a serious uptick. It's also worth noting where the price increases are coming from. The price of goods from China rose 0.3 percent in September and have risen at a 3.2 percent annual rate over the last quarter. By comparison, the index for imports from China stands at 99.0 (with a 2003 base), which means that they had been falling in price until very recently. This means that instead of depressing inflation, imports from China are now adding to it. A process which may accelerate if China decides to revalue its currency against the dollar. There is no reason to panic over the import price story, but we are beginning to see an uptick in prices which is the expected result of a falling dollar. The rate of increase in import prices is likely to increase further in the months ahead as prices adjust to a lower value of the dollar.
--Dean Baker