Import prices rise again

Rising at the fastest pace since July 2008, the Import Price Index rose for the third-consecutive month, increasing 1.3% in May as the cost of petroleum continues to rise.

Because of the huge drop in oil prices versus a year ago, the index is down 17.6% year-over-year but the downward trend has probably run its course.

If you pull out the price of oil flowing into the US, prices edged up 0.2%. The first rise in almost a year was mostly the result of an increase in the cost of industrial supplies, and that corresponds to recent gains in commodity prices.

It's unlikely we will see a jump in imported inflation simply because there is too much excess industrial capacity around the world. Put more simply, if a businesses overseas tries to raise prices, there are several that can step in and easily undercut him.

On the flip side, the data are the latest in a string of economic reports that signal deflation is unlikely to overwhelm the economy. See The Deflation Monster. And the weakness in the dollar should also underpin prices.