Friday, September 13, 2013

The Dropping Price of Imports

Are we headed for a bout of deflation? The Labor Department reported yesterday that the price we paid for imports (excluding petroleum) over the past 12 months dropped by 0.9 percent. As recently as July of 2011, that same figure showed more than 5 percent inflation.

The biggest factor in that price drop has been Japan. Imports from Japan have dropped in price by 2.6 percent over the past year, as their political leaders have focused on devaluing the yen. Japanese import prices were steady as recently as six months ago, and showed about 3 percent inflation as of July 2011.

Will those lower import prices be reflected in lower prices overall? It might, but prices don't really have all that much room to drop further. The current annual inflation rate as measured by the Consumer Price Index is 1.9 percent.

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