Whiff Of Inflation?

By John S. McClenahen The U.S. Import Price Index increased 0.4% in November, the U.S. Labor Department reported Dec. 11. Because the increase was twice what economists generally expected and was relatively broad based -- extending to petroleum, metals, chemicals, capital goods and consumer goods -- it raises the possibility that inflation, particularly moving into 2004, may be higher than anticipated. "Both the [U.S.] dollar's long slide and global recovery have contributed to the revival of import price pressures," notes UBS Investment Research, New York. "The rebound in import prices is one reason that we expect inflation to begin creeping higher again next year." In its most recent forecast, UBS projected the "core-CPI," which excludes changes in the price of food and fuel, rising from a 1.7% annual rate in the first quarter of 2004 to 2% in the fourth quarter.

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