Higher oil leads surge in import prices

Led by a 20.3% jump in oil prices, the Import Price Index surged 3.2% in June, easily outstripping the consensus forecast of a 1.9% rise per Bloomberg News.

Ex-energy, prices edged up 0.2%. We are not going to see much in the way of import-price inflation anytime soon. Oil prices have begun to recede and the increase in the headline figure is likely a one-time event.

Moreover, there is plenty of excess capacity around the world and that should also keep a lid on inflation coming in from overseas. The modest increase, however, seems at odds with the severity of the recession.

The drop in the dollar could be playing a partial role as a falling US currency makes it more expensive to import goods. But there are lags that occur between currency movements and prices. Nonetheless, the increase ex-oil is only the latest in a string of reports that seems to be deflecting the deflation argument.