U.S. import prices rise modestly in September on surge in petroleum, underlying trend stays weak

U.S. import prices rose modestly in September, owing to surge in petroleum. Sequentially, import prices rose 0.2 percent, driven by 2.3 percent rise in petroleum. Stripping petroleum, import prices dropped 0.1 percent sequentially and 1.1 percent, reflecting a large fall in food and muted inflation throughout core categories such as capital goods, autos, parts and consumer goods. The trend in imported inflation continues to be weak, and prices throughout major components continue to fall on an annual basis.

Over the past year, imported inflation has worsened. The sharp fall in energy prices in late 2018 drove headline import prices into deflation, but softness has also spreads to core import prices excluding food and energy. For example, capital and consumer goods prices have been in deflation since October 2018 and February 2019, respectively.

Within capital equipment, computers and semiconductors drove prices lower, and the fall has been especially sharp for prices from Mexico and China.

“In our view, the weakness in prices of durable capital goods is likely related to the broader slowing in global manufacturing activity. On the consumer side, the inflation trend weakened significantly for large household and recreational goods, but prices seem to have stabilized in recent months”, said Barclays in a research report.