hr: Money

The surging oil prices that are raising exporters’ costs to ship everything from steel to sofas to America are encouraging customers to buy more domestically made goods — and giving the producers of those goods more room to raise their prices.

“It’s changing global costs,” says Jeffrey Rubin, chief economist at CIBC World Markets in Toronto during a Bloomberg interview. For importers, the rising cost of shipping is “like an increase in tariffs,” says San Francisco Fed economist Reuven Glick.

Just as duties on imported goods give domestic industries cover to raise their own prices, higher shipping costs have the same inflationary effect, Rubin says. Fuel costs have made it so expensive to ship low-priced bookshelves to the U.S. that Ikea is starting to make them in America. Asian steel exporters, saddled with higher freight rates, are losing U.S. market share, allowing domestic producers to boost their prices.

The cost of foreign goods excluding petroleum climbed at an annual rate of 6.6 percent in May, the fastest increase since 1988, the BLS says.

Iron and Steel

Iron and steel import prices were up 46.4 percent in May from a year earlier, government figures show. U.S. steel production has risen nearly 3 percent this year as imports have declined 12 percent, according to the American Iron and Steel Institute in Washington.

Chinese Firms’ Disadvantage

Chinese steelmakers are doubly disadvantaged by higher oil prices. The result may be higher business costs and inflation, he adds.

Furniture companies are among those redoing the sums. Prices for imported furniture and related products rose 6.3 percent in May compared with the year-ago month.