Import, small business data point to inflation

A stack of chocolate bars sits on a table before being wrapped at the Mast Brothers Chocolate factory in the Brooklyn borough of New York July 8, 2010. The company takes all the steps in the manufacturing process from importing and roasting the beans to making the finished product.

WASHINGTON (Reuters) - The cost of imported products in the United States rose for a seventh straight month in April thanks to a weaker dollar, and more owners of small businesses raised prices, in potentially worrying signs of inflation.

Import costs rose 2.2 percent after increasing 2.6 percent in March, the Labor Department said on Tuesday. While the rate of increase slowed as food and energy costs moderated, it surpassed economists' expectations for a 1.8 percent gain.

Another report showed high energy costs are forcing companies to raise prices even though demand is far from robust. A survey of small businesses by the National Federation of Independent Business found 12 percent raised prices in April, up from 9 percent the prior month.

Economists said the rise in import prices and the number of small businesses raising prices could be a problem for Federal Reserve officials who have maintained the recent surge in commodity prices was transitory.

"The reality is that even at the small business level, producers are increasingly more confident in their ability to pass on costs to consumers," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York.

Much of the increase in import prices, which were broad-based, was blamed on the dollar's almost 4 percent depreciation against a basket of currencies in April.

"The Fed wanted higher inflation, but they should be careful what they wish for," said Chris Low, chief economist at FTN Financial in New York. "Because so much of the inflation has come from dollar depreciation raising costs, it will cause the economy to slow."

NO IMPACT ON WHOLESALE, CONSUMER INFLATION

The import prices data was collected early in the month and has little bearing on the wholesale and consumer inflation reports to be released on Thursday and Friday.

Commodity prices collapsed last week, knocking oil prices down. U.S. crude prices have dropped to about $102 a barrel from more than $114 at the start of May. If the declines are sustained, they should ease high gasoline prices, which have pressured consumers.

There was some positive news on the economy. A report from the Commerce Department showing wholesale inventories rose 1.1 percent in March and sales jumped 2.9 percent showed some parts of the economy had substantial momentum at the end of the first quarter.

The report hinted that first-quarter gross domestic product growth could be revised higher from the initially reported 1.8 percent annual rate. Much will depend on trade data for March due on Wednesday and businesses inventories for the same month to be released on Friday.

Wholesale sales rose to $392.01 billion in March, the highest level since June 2008, just as the U.S. credit crisis was morphing into a broader phenomenon that pushed the world economy into recession.

The fast pace of sales pushed the inventory to sales ratio down to 1.13 months, matching June 2008 lows. The lean level suggests business may seek to rebuild stocks, which would spur further production.

The monthly rise in import prices reflected a 7.2 percent increase in imported petroleum prices, which followed a 9.8 percent advance in March. Imported food prices increased 1.8 percent, slowing sharply from a 4.2 percent rise in March.

Stripping out both petroleum and food, import prices rose 0.5 percent in April after a 0.3 percent rise in March.

The report also showed export prices rose 1.1 percent after increasing 1.5 percent in March. Analysts had expected export prices to gain 0.9 percent.

(Editing by James Dalgleish)