Higher Fuel Costs Push Up Import Prices for Fifth Month in a Row

June import prices rose +1% MoM (consensus +.7%), and accelerated higher on an annual basis to +2.3% YoY versus +1.4% YoY in May. Excluding petroleum, prices rose +.2% MoM (+2.6% YoY), down from +.5% MoM in May, as oil prices rose to a ten month high. May's monthly import price gain was revised higher to +1.1% MoM versus the prior reported value of +.9% MoM.

The cost of imported capital goods rose for the first time this year, increasing by +.2% MoM, but are still -.1% lower YoY. Costs for imported consumer goods, excluding autos, were unchanged for the third month in a row, but auto prices have been rising, gaining +.1% MoM. It appears that U.S. companies are not yet passing on higher costs to consumers.

Chinese goods rose +.3% MoM, for the second month in a row. This marks the largest two month gain ever recorded. Over the last year, import prices from China have risen +.6% YoY. Prices from other major trading partners are also rising, mainly due to petroleum price increases. On an annual basis, import prices from Mexico have risen +5.8% YoY, Canada +4.1% YoY, and prices from the EU have risen +2.1% YoY. Of the major trading partners, only Japan has continued exporting deflation, with prices falling -.7% YoY, but rising +.1% MoM.

The weakening of the dollar feeds directly into higher import prices, which is a concern as the dollar index approaches historic lows. This will keep the Fed concerned about inflation risks rising.

Export prices are accelerating higher, rising +.3% MoM in June after rising +.2% MoM in May, mainly due to a +2.9% MoM (+18.5% YoY) increase in agricultural prices.