Main menu

Imported goods prices rise as the dollar falls

This morning the BLS reported that April imported goods prices were 11.1% higher than a year ago. Excluding petroleum, import prices were up 4.3% year over year. So it's not just oil prices that are moving up, it's all prices. And the common denominator behind all imported goods prices is the dollar, whose value has been declining since 2002.

The two charts above tell the story. The top chart shows an index (nsa) of all imported goods prices ex-petroleum. The bottom chart is a popular measure of the dollar's value against other currencies. Note how the two lines tend to move in opposite directions: the rising value of the dollar from 1995 through 2002 corresponded to a decline in imported goods prices; while the falling dollar from 2002 on has seen a substantial rise in imported goods prices.

This simply illustrates the obvious fact that a weak currency inevitable results in more inflation. If the dollar were to continue to decline, then imported goods prices would continue to rise and eventually all prices would rise.

Filled Under:


Posting Komentar