Inflation Dead Ahead: Core Import Prices Surge Most In 6 Years

Economists, but mostly traders, breathed a sigh of relief last month when US import prices (ex petroleum) printed an unexpected 0.2% drop last month, a big miss relative to expectations and recent gains.

However, as it turned out, this unexpected drop was merely a delayed effect by US trade partners, with inflation of rising foreign prices merely deferred, and in January import prices jumped by a whopping 1.0% M/M, in line with the highest monthly increase observed in the past five years.

Furthermore, excluding petroleum, the annual increase in import prices (NSA) rose to the highest in 6 years, as suddenly the US is importing far more inflation that previously expected.

And since this is usually a 2-3 month leading inflationary indicator, we expect this to manifest itself in rising prices sometime in the early spring, just as the Fed unveils its new and improved dot plot.

Finally, those wondering where this inflation is being imported from, the chart below should provide some hints.