Import prices surge on petroleum

WASHINGTON (Reuters) -- U.S. import prices rose 1.3% in May, the Labor Department said Friday, but the gain was powered by petroleum prices and underlying import price pressures were more muted.

Analysts had forecast import prices would rise 1.3% after a revised 1.1% rise in April, previously reported as a 1.6% increase. May's gain was the largest since a 1.4% advance in July 2008.

Recent declines in the dollar might press import prices higher and contribute to inflation, but year-over-year, import prices declined by a record 17.6%, indicating little threat of this at the moment.

"The data still suggest a lurking inflation threat, but that's not likely to perturb the markets just yet given ongoing weakness in economic growth," said Action Economics in a note to clients.

On the other hand, there were signs that prices had arrested their prolonged slide in the face of the most severe worldwide economic slowdown in a generation, chiming with other evidence that a recovery may be drawing near.

Non-petroleum import prices rose 0.2% in May, the first increase since July 2008, although they were down a record 5.8% over the year.

The Labor Department said the increase in non-petroleum prices was driven primarily by a 0.6% increase in prices for non-petroleum industrial supplies and materials, also the first rise for that index since last July.

Higher prices for automobiles and for foods, feeds and beverages also contributed to May's overall increase in non-petroleum prices, the Labor Department said.

Export prices rose 0.6% in May compared with forecasts for a 0.4% gain. They rose 0.4% in April and are down 6.5% over the year.

Imported petroleum prices were up 8.3% in May, the fourth consecutive gain after bottoming in January, but are 51.4% lower over the year.