As with most other categories of manufactured goods, raw material costs and the U.S. dollar’s depreciation against many major currencies put upward pressure on prices for automotive parts and engines. However, import prices for automobiles did not increase as much as would be expected on the basis of the U.S. dollar’s depreciation, indicating that foreign manufacturers absorbed some of the exchange-rate effects to maintain market share, particularly in the lower priced models. Prices for imported parts increased 0.7 percent in 2003, but were still 0.7 percent below 2000 levels. With sales slow and competition, in general, intense, auto manufacturers continue to pressure their suppliers to keep parts prices low.
Foods, feeds, and beverages. The price index for foods, feeds, and beverages increased 3.0 percent in 2003, following a 5.9- percent increase in 2002. Prices for agricultural foods, feeds, and beverages increased 4.6 percent, while prices for non- agricultural foods posted a decline of 1.7 percent. Beef prices pressed higher due to a smaller U.S. herd and a shortage of livestock because of an embargo on Canadian cattle imports. Vegetables prices also increased in 2003, by 3.4 percent, countering declines in coffee and fruit prices. The decline in prices for nonagricultural foods was the result of shrimp continuing to be in oversupply, while lobster prices fell after
winter 2002–03 highs.
Locality of Origin price indexes.
Another avenue for analyzing
import price movements—particularly when assessing the impact of exchange rate fluctuations—is to consider import prices by country or region of origin. The Bureau produces such price indexes according to seven major regional categories: Industrialized Countries, Other Countries, Canada, the European Union, LatinAmerica, Japan, and theAsian Newly Industrialized Countries (NIC’s). Within the first five of these localities, the price indexes are further disaggregated by manufactured and nonmanufactured goods.
Import prices for the European Union increased 3.4 percent in 2003, following a 3.6-percent increase in 2002. The U.S. dollar depreciated significantly against major foreign currencies in 2003: over the year, the dollar fell against the Euro by 17 percent.10 After rising 6.4 percent in 2002, the price index for Canadian imports increased 5.2 percent in 2003, a year in which the U.S. dollar fell against the Canadian dollar by 16 percent. Also in 2003, prices for imports from Japan edged up 0.1 percent, following a decline of 2.5 percent in 2002. The U.S. dollar declined against the Japanese yen by 12 percent in 2003. In general, currency effects have not been fully passed on to import prices, for a variety of reasons, including worldwide excess capacity preventing prices from rising; foreign exporters holding their prices steady to maintain market shares; and an increasingly integrated and competitive global economy weakening companies’ power to pass on higher costs to customers.11
In contrast, theAsian NIC’s price index fell 0.4 percent in 2003 after declining by 2.7 percent in 2002 and 5.5 percent in 2001. Prices for finished goods—particularly capital goods—were the primary contributors to the downward trend in this index. Furthermore, theAsian NIC’s price index is unaffected by currency fluctuations, because the respective currencies are either pegged to the U.S. dollar or managed within a specified range.
Energy prices also affected the Locality of Origin price indexes, including the index for LatinAmerican imports, which rose 3.7 percent in 2003. Prices for nonmanufactured imports from Latin America rose 10.6 percent over the year. Oil and gas imports from Canada and the European Union totaled nearly $30 billion in year-2000 weights, and the respective 8.7-percent and 14.1- percent increases in those commodities’ (non-manufactured imports) prices reflect higher energy prices.
Services. The Bureau publishes a set of services price indexes, primarily transportation related. The U.S. import price index for air passenger fares, which measures fares paid to foreign carriers by U.S. residents for international travel, declined 0.2 percent in 2003 after rising 1.4 percent in 2002. The price index for import air freight, which measures changes in rates paid for the transportation of freight from foreign countries to the United States on foreign air carriers, increased 7.5 percent in 2003. Unlike the index’s 11.8-percent gain in 2002—the result of the West Coast port shutdowns—the 2003 increase parallels the U.S. dollar’s depreciation and demand-driven increases in shipment volumes.
Inbound ocean liner rates picked up in 2003, increasing 26.3 percent over the year. The majority of the increase occurred worldwide, concomitantly with contract renegotiations in the second quarter. The renegotiations came about out of attempts to compensate for unanticipated industry growth and high demand that began in 2002, particularly from China, the United States, and Europe.12 Inbound crude-oil tanker freight rates also increased in 2003, by 16.8 percent. Prices surged in the first quarter due to diminished tanker availability. Thereafter, a reversal in tanker freight rates was followed in late fall by a resumption of rate increases, driven by seasonal stockpiling and weather-related transit problems.
Export price trends
Agricultural goods. Prices for foods, feeds, and beverages rose 12.6 percent in 2003, following an 8.0-percent increase in 2002. Substantial increases in soybean and meat prices contributed to the rise in the overall foods, feeds, and beverages index. Soybean harvest shortages due to hot, dry weather in South America and Europe led to diminished world supplies, and significant demand from China and Europe pushed soybean prices higher. Meat supplies, particularly beef, have been tight due to the ban on imports of live cattle from Canada. Moreover,
Monthly Labor Review