Import prices in modest upward trend

Led by a 3% rise in fuel costs, import prices increased 0.9% in October, while the price of imports less the cost of fuel rose a modest 0.3%, the third such rise in as many months.

Year-over-year, import prices are up 3.6%. Excluding fuel, prices are up a more reasonable 2.5% from a year ago.


(Source:BLS)

Delving into the data, October’s increase was skewed heavily by rising food and raw material costs as well as the increase in petroleum prices.

It comes a no surprise that higher raw material costs are impacting the Import Price Index, given that a number of commodity prices have jumped in recent weeks. 

Overseas growth, especially in China and emerging economies, are forcing prices higher, while the expectation in late summer and early fall that the Fed was ready to embark on a new round of quantitative easing – made official on November 3 - also fueled speculation in these commodities.

However, outside of oil and many commodities, prices are holding steady.

Capital goods – 23% of the index – was unchanged in October, while consumer goods – another 25% – fell 0.5%.  Year-over-year, prices are down 0.1% and 0.6%, respectively, indicating that nearly half of all imported goods, finished goods in this case, continued to be affected by the weak U.S. economy, which makes it difficult to boost prices.

If the dollar continues in its downward trend, we may eventually see small amounts of imported inflation, but much depends on how quickly demand ramps up in the U.S. economy.