Friday, June 13, 2003

That deflation train just keeps chugging along. Producer prices in the US fell 0.3% in May, the second montly decline in a row. The core producer price index (total finished goods minus food and energy) ticked up slightly, by 0.1%, demonstrating that falling energy prices are a big part of the story, but clearly not the whole enchilada. The April and May figures suggest the US economy is returning to its 2002 form when producer price deflation was the norm, rather than ealry 2003 when producer price inflation looked to be returning.

In other news, the US trade deficit narrowed by nearly 2% in April, climbing down from an all-time monthly high in March (-$42.9bn) to the third highest monthly total ever in April (-$42.0bn). This was achieved almost solely on the back of a decline in the import of oil and natural gas (exports of both goods and services declined in April). Not to say that Americans imported less oil and natural gas -- only that prices on these items fell. US imports by volume of crude petroleum went up 4.6% in April, and total energy-related petroleum products imports rose 0.2%.

Only global price deflation is narrowing the US trade gap.

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