Import Prices Fall, Export Prices Rise

Price weakness is the signal from June's import price data. Import prices fell a sharp 0.4 percent which is outside Econoday's low estimate with declines posted across readings: foods & feeds down 2.6 percent, petroleum products down 0.8 percent, industrial supplies down 0.1 percent. And even finished goods show a sweep of declines led by consumer goods which fell 0.3 percent. This decline for imported consumer goods, coming at a time when U.S. trading partners are beginning to apply tariffs, could become a signpost to look back on should a trade war begin to inflate prices.

Export prices rose an as-expected 0.3 percent on pricing power for nondurable industrial supplies but otherwise there is plenty of weakness including agricultural prices which fell 1.0 percent in the month. Finished goods prices are also weak showing small declines for exported vehicles as well as consumer goods.

Country data also show a sweep of declines including a 0.9 percent price dip for imports from Latin America and 0.3 percent declines for the European Union and Canada. Prices from China were unchanged.

Recent strength in the dollar, meaning greater purchasing power for foreign goods, is a likely factor behind the slide lower in import prices. But tariffs don't appear to be a factor at least for June as prices for imported iron and steel, after three strong gains, declined 0.3 percent with prices for imported aluminum unchanged in the month.

Today's report stands in contrast to Wednesday's producer price report where pressures for energy and also tariff-related increases for metals were evident. But the import side of today's report is consistent with yesterday's report on consumer prices, that inflation right now is contained and, from the Federal Reserve's perspective, with no major risk of overshoot evident.