Import prices increased 2.3% in May -- higher than expected -- driven by near record-high prices for imported oil and natural gas, the U.S. Labor Department announced Thursday. Excluding energy, import prices increased a scant 0.5% in May.

Economists surveyed by Bloomberg News had expected import prices to rise 2.0% in May. Import prices increased 2.4% in April and 3.0% in March.

In May, imported petroleum increased 7.8%, and natural gas increased 5.4%. Further, petroleum prices rose 68.8% for the year ended May 2008 -- the largest 12-month advance since the index increased 82.5% between February 2002 and February 2003.

Meanwhile, export prices increased 0.3% in May 2008, its smallest rise since September 2007. Further, export prices rose 8% over the past year.

The U.S. trade deficit rose to $60.9 billion in April, the U.S. Commerce Department announced Tuesday, as the rising cost of imported oil offset gains in goods exported.

Economists surveyed by Bloomberg News had expected the trade deficit to be $59.5 billion. Also, the March trade deficit was revised lower to $56.5 billion from the previously announced $58.2 billion.

In April, imports increased to 4.5% to $216.4 billion, with imported petroleum driving up the total. The United States paid a record $96.81 average price for a barrel of oil during the month. Exports increased 3.3% to $155.5 billion, boosted by sales of commercial aircraft, autos, machinery, and agricultural equipment.

Meanwhile, the nominal April trade deficit, which controls for inflation, fell to $46.9 billion - - its lowest level in about 5 years.

Bad news, Good news

Economist David H. Wang told BloggingStocks Tuesday he's emphasizing the good news in the report which he argues is the more substantive and telling dimension of the report.

"If you take away oil and control for inflation, we can see a continued downward track in the trade deficit, led by rising exports," Wang said. "As we saw in the February and March trade data, international demand for U.S. goods is a bright spot in our economy. Without it, would will be in a pronounced recession."

The dollar plunged Friday after Morgan Stanley said oil prices could rise to $150 and after data indicated the U.S. employment rate surged to 5.5% in May.

The dollar fell one cent versus the euro to $1.5694 and about three-quarters of a cent versus the British pound to $1.9640. The dollar also declined about one half-yen to 105.55 versus Japan's yen.

A Morgan Stanley report ended what had been a mild dollar rebound over the past week. Morgan Stanley said oil prices could rise to $150 per barrel, due to Asia's likely accelerating purchase of Middle East oil exports, Bloomberg News reported Friday. Oil surged $6.54 to $134.54 per barrel in early trading Friday, on top of Thursday's large $5.49 gain.

Also Friday, the U.S. Labor Department announced that the nation's unemployment rate surged to 5.5% in May from 5.0% in April, as U.S. companies continued to cut expenses to protect profits in the face of the economic slowdown.

So much for the (latest) dollar rally

Currency trader Andrew Resnick told BloggingStocks Friday the oil/unemployment double-whammy would be tough for a strong currency to withstand, let alone the fragile dollar.

"We were experiencing a modest dollar rally, and there were signs of strengthening dollar-bullish sentiment. The Fed may raise interest rates and oil prices up until a few days ago were trending lower on the belief global oil demand will drop off. But the dollar-bulls have been defeated again," Resnick said. He added that he was presently flat after being stopped out of dollar long positions in the euro-dollar and British pound-dollar currency pairings.

Further, Resnick said the Thursday/Friday events underscores how hard it is for the market to sustain a dollar rally in the face of dollar fundamentals that have remained decidedly negative for more than four years.

"It's the old problem of the terrible twins, the U.S. trade deficit and the federal budget deficit," Resnick said. "People had talked up the ability of the dollar to gain support on [Fed Chairman] Bernanke's interest rate pause, but the fundamentals laid waste to that sentiment again," Resnick said. "Until the deficit numbers show steady improvement, and the [U.S.] economy starts to grow, it's hard to see the dollar sustaining a rally. The economy is simply too weak right now."

Readers of this space know that the railroad sector is one of the preferred sectors. After decades of unconscionable neglect, U.S. railroads are experiencing a resurgence, driven by international trade, commodities transport, and the rail's cost advantage over truck transport.

Further, the revival of the rails is not exclusive to one nation in North America. Canada also is seeing a healthy growth in railroad services and Canadian Pacific (NYSE: CP) is worth a review.

Analysts see 4-6% revenue growth for CP in 2008, in Canadian dollars, with grain, fertilizer and oil sands related shipment gains offsetting declines in forest products.

Another positive: analysts also expect CP to continue to improve rail system efficiency and fluidity, will overall better asset utilization

The ever-incisive FT columnist Martin Wolf reminds us that while globalization's prize is plus-sum (everyone gains), as opposed to zero-sum (Country A gains only if Country B loses), it is not perfect sum (there are costs) nor egalitarian sum (everyone gains equally).

The biggest advantage of globalization, in Wolf's view? The spread of prosperity, including a wider distribution of innovation and bigger opportunities for profitable exchange/trade. Also valuable, although not guaranteed, Wolf says, is increased political stability in previously impoverished countries.

Globalization marches on

Further, in the globalization era's first decade, the United States can't do anything to halt the flow of ideas, and the diffusion of knowledge, skills, technology systems, and so forth, Wolf argues. Or at least the United States can't do anything decent to stop globalization.

Readers of this space know that one of the preferred sectors is the railroad sector. The once near-rust-belt level sector has experienced a revival at the start of the globalization age, and compelling economic trends document the commerce-based underpinnings of this revival.

Most transportation officials agree that the U.S. transportation infrastructure -- highways, roads, bridges, mass transit systems -- is in need of a major upgrade in order to meet the nation's vehicle transportation needs of the 21st century.

The nation's public officials will begin to address the above concern in the years ahead, as public funds become available, but until they do, and due to crude oil's sustained high price, an opportunity has emerged for another transportation form: you guessed it, the railroads. And Norfolk Southern (NYSE: NSC) is a railroad worth an evaluation.

Norfolk Southern provides rail transportation in the eastern United States, operating a 21,000-mile rail network in the eastern United States and Canada. It's an elaborate intermodal and coal service network that also has a large freight business.

Readers of this space know that one of my preferred sectors is the railroad sector. The growth in international trade, the importance of commodity transport, and record-high oil prices mean the rails will play a central role in the nation's economy. And a railroad stock worth owning is CSX Corp.

CSX Corp (NYSE: CSX) operates the largest rail network in the eastern United States, with a 22,000-mile rail network in 23 states and two Canadian provinces.

In general, analysts see 9-12% revenue growth for both 2008 and 2009, with continued pricing power (including expired contract re-pricings) and improved asset utilization.

Further, coal traffic should rebound in 2008, while intermodal traffic is expect to remain solid, even with a slowdown in the building materials and automotive businesses.

Also, several infrastructure improvements and capacity increases should improve CSX's delivery times and reduce dwell times. The Reuters F2008/F2009 EPS consensus estimates for CSX are $3.60/$4.23.

Currently trading around $68 with a p/e of 226, CSX is not cheap. But the view here is that the 3-5 year outlook is promising for this major rail line; moreover, the likelihood of persistently-high oil prices means more businesses will switch to rail transport for goods.

April U.S. import prices rose 1.8%, the U.S. Labor Department announced Tuesday, as petroleum and non-petroleum imports contributed to the rise for the second straight month.

Excluding petroleum/oil, prices increased 1.1%. Economists surveyed by Bloomberg News had expected prices to rise 1.7%. Meanwhile, March 2008 import prices rose a revised 2.9%.

On a year-over-year basis, import prices are up 15.6% -- a level that historically indicates that U.S. consumer price inflation will trend higher due to prices pressure from foreign goods/services.

Economist David H. Wang said the report contained few surprises. "The report continues to display the consequence of record-high oil prices, which are boosting inflation just about across the price spectrum," Wang said.

U.S. Federal Reserve officials, economists, executives, analysts and others closely monitor changes in import and export prices because they provide reads on inflation in the U.S. and internationally. Furthermore, the data frequently has a direct impact on the bond and the currency markets.

The U.S. trade deficit fell substantially in March 2008, to $58.2 billion, the U.S. Commerce Department announced Thursday, as the slowing U.S. economy reduced consumer demand for imported automobiles, furniture and consumer goods, among other categories.

The March 2008 trade statistic was the lowest trade gap since November 2003, the Commerce Department said.

Economists surveyed by Bloomberg News had expected the March 2008 trade deficit to be $60.8 billion.

The February 2008 trade deficit was revised lower to $61.7 billion from $62.3 billion. The trade deficit was $59.0 billion in January 2008.

In March 2008, nominal imports decreased 2.9% to $206.7 billion, while nominal exports fell 1.7% to $148.5 billion.

Slowing U.S. economy weighs

Economist David H. Wang told BloggingStocks Friday the March 2008 trade report clearly displays the effects of a slowing U.S. economy.

"We see a clear pullback in domestic demand in March [2008], and the core import number was down 3%, so that's indicative of fewer consumers making purchases, which is consistent with belt-tightening and U.S. payroll reductions," Wang said. "It's clear now our nation is demanding less from international suppliers, which will have a negative effect on their economies, as well."

When a major, metropolitan U.S. newspaper discovers a investment trend or a hot sector, count on increased share demand for companies in the sector. When that paper is one of the top three dailies, in this case The Washington Post, count on even more demand.

On Monday, The Washington Post examined the resurgence of the United States' railroad sector, touching on many of the themes discussed here during the past six months, and described why the rails' services are likely to be in demand for many years.

China's economy grew 10.6% in Q1 2008, the Xinhua News Agency reported Wednesday, citing National Bureau of Statistics research, a pace well above what Chinese Government's ceiling for 2008 GDP growth.

Further consumer prices increased at annualized rate of 8.3% during March 2008, Xinhua reported, as China's infrastructure development and consumer demand for goods/service continued to place upward pressure on commodities and retail prices. China's GDP grew 11.9% in 2007.

In Q1 2008, industrial production jumped 16.4%, while investment in fixed assets, a category that covers categories from housing to new factory equipment, surged 24.6%.

An International Monetary Fund steering committee is urging global leaders to cooperate to deal with the current financial crisis, which the IMF concludes is global in scope.

In its communiqué following its spring meeting, the IMF said it was meeting at a time of "unusual uncertainty regarding global economic and financial market prospects." The IMF added that the challenges facing the world economy are of a global nature, requiring strong action and close cooperation among the membership.

Cites financial instability, credit crunch

The IMF said global financial instability has increased since its last meeting. Further, global economic growth has slowed and growth prospects for 2008 and 2009 have deteriorated, adding that risks to the outlook come from the still unfolding events in financial markets and from the potential worsening of the housing and credit cycles. (Earlier this year the IMF cut its 2008 global GDP growth forecast to 3.7% from 4.2%)

Meanwhile, for developed economies, the IMF said monetary policy should continue to aim at medium-term price stability, while responding flexibly to signs of a more pronounced and prolonged economic downturn. The IMF also endorsed fiscal stimulus, at least temporarily, as an appropriate engine of growth and as a stimulus tool, saying fiscal policy can also play a useful, counter-cyclical role. In the United States, "temporary fiscal easing will help to counter downside risks to growth," the IMF said.

A surge in imported oil prices pushed March 2008 import prices up 2.8%, the largest increase in four months, the U.S. Labor Department announced Friday.

Economists surveyed by Bloomberg News had expected March 2008 import prices to rise 1.8%. Meanwhile, March 2008 export prices rose 1.5%.

On a year-over-year basis, import prices are up almost 15% -- a level that historically indicates that U.S. consumer price inflation will trend higher, due to price pressure from foreign goods/services.

U.S. Federal Reserve officials, economists, executives, analysts and others closely monitor changes in import and export prices because they provide a read on inflation in the U.S. and internationally. Furthermore, the data frequently has a direct impact on the bond and the currency markets.

Imported oil prices rocked 9.1% in March 2008, natural gas jumped 7.7%, and feeds/foods/beverages increased 2.5%.

China let the yuan rise to a record level versus the dollar Friday, Bloomberg News reported, in a sign Beijing may be modifying its currency stance in order to regain control of inflation.

The yuan strengthened to 6.9907 yuan versus the dollar Friday, its strongest level since the Chinese Government moved from a fixed or "dollar pegged" currency rate to a system that limits the yuan's currency appreciation to about 5% per year.

China has kept the yuan artificially low -- or not set by free-market, foreign exchange forces -- in order to stimulate economic growth and protect its young economy. The low yuan keeps the cost of Chinese exports low -- a major factor in both China's record trade surplus with the United States and its surging manufacturing export revenue. Critics charge that the low yuan gives China an unfair advantage versus foreign manufacturers: many of these producers, among others, argue that the yuan would appreciate to 5 or even 4.5 yuan to the dollar if allowed to float freely.

The U.S. trade deficit unexpectedly widened in February 2008, the U.S. Commerce Department announced Thursday, as automobile and machinery imports offset record exports.

The February 2008 trade deficit increased to $62.3 billion - - its highest total since November 2007 - - and an increase over January 2008's revised total of $59.0 billion.

Economists surveyed by Bloomberg News had expected the February 2008 trade deficit to be $57.5 billion.

Excluding services, imports increased 3.5% to $180.2 billion, while exports rose 2.4% to $104.7 billion.

Exports shine

On the bright side, U.S. exports rose for the 12th consecutive month, representing one of the few solidly-performing dimensions of the otherwise anemic U.S. economy. Economists say the weaker U.S. dollar is assisting export sales, as it makes U.S. goods less expensive abroad. On Thursday, the dollar also fell to a record low $1.59 versus the euro.

Another bright point: the U.S. petroleum deficit decreased to $32.5 billion, its first decline in eight months. A decline in the quantity of oil imported offset a record oil price of $84.76 per barrel.