US Import Prices Down -0.5%, First Sequential Drop Since June 2010, Up 13.6% From Last Year

Tyler Durden's picture

The BLS reported that import prices declined by 0.5% in the month of June, slightly less than the 0.6% predicted by the consensus. This was a substantial drop from the revised 0.1% increase in May and was the biggest monthly drop since June 2010's -1.2% drop. More importantly, on a year over year basis the increase in import prices was 13.6%. The key driver was the drop in Fuel Import prices, which slumped by 1.6%, after a 0.8% drop in May. "Both petroleum and natural gas prices contributed to the June decrease in fuel prices, falling 1.6 percent and 1.4 percent, respectively. Despite the declines over the past two months, fuel prices rose 46.9 percent over the past year. That increase was primarily led by a 49.8 percent jump in petroleum prices." Core import prices were down 0.1%, the first monthly decline for the index since a 0.3% decrease in July 2010. "The June decline was driven  by a 0.4 percent decrease in nonfuel industrial supplies and materials prices and a 1.9 percent drop in foods, feeds, and beverages prices, which more than offset higher prices for automotive vehicles and consumer goods. Nonfuel import prices advanced 4.8 percent for the year ended in June." According to Bloomberg economist Joseph Brusuelas lower petroleum, food, industrial supplies “should provide a breather” for cos. facing margin compression. At the same time, rising cost of motor vehicles, parts likely to fuel near-term core inflation rise.

Some more selected highlights:

Nonfuel Industrial Supplies and Materials: Nonfuel industrial supplies and materials prices fell 0.4 percent in June, the first time the index has recorded a monthly decline since a 1.1 percent decrease in July 2010. A 2.6 percent downturn in unfinished metals prices led the June decline. The price index for unfinished metals also last recorded a decrease in July 2010, and despite the June drop, rose 21.3 percent over the past 12 months.       

Finished Goods: Finished goods prices increased overall in June. Automotive vehicles prices rose 0.3 percent, following advances of 0.5 percent, 0.4 percent, and 0.5 percent, respectively, the previous three months. Prices for consumer goods ticked up 0.1 percent, led by a second consecutive 0.7 percent rise in the price index for cotton apparel and household goods, which has risen 10.3 percent over the past year. Capital goods prices were unchanged in June.    
 
Foods, Feeds, and Beverages: Foods, feeds, and beverages prices declined 1.9 percent in June following a 0.7 percent drop the previous month. Both decreases were primarily driven by falling vegetable prices, down 16.1 percent in June and 9.4 percent in May.  

Imports by Locality of Origin: The price index for imports from China advanced 0.1 percent in June, the smallest monthly advance since the index was unchanged in September 2010. Import prices from China have risen 3.1 percent over the past year, the largest 12-month increase since November 2008. Prices for imports from the European Union also rose 0.1 percent in June. In contrast, import prices from Mexico and from Canada declined in June, decreasing 2.2 percent and 1.0 percent, respectively.  

Transportation Services: Import air fare prices rose 6.8 percent in June after advancing 5.6 percent in May.
Both increases were driven by seasonal increases in European and Asian air fares. The index for import air
fares advanced 5.0 percent for the year ended in June. In contrast, import air freight prices edged down 0.1
percent in June.

With crude having established a base now courtesy of the IEA's action, expect import prices in July and onward to resume their gradual roll higher, with respective pass throughs to consumers coming shortly thereafter.