The Labour Department said yesterday import prices gained 0.3% last month after falling 0.2% in March.
The report came on the heels of data this week showing benign monthly consumer and wholesale price readings in April. “Import prices are consistent with our view that domestic inflation pressures will continue to gradually develop,” said Kathryn Asher, an economist at Moody’s Analytics in West Chester, Pennsylvania.
Signs of a moderate build-up of price pressures suggest the Federal Reserve will continue to gradually raise interest rates even as inflation is flirting with the US central bank’s 2% target.
The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, accelerated 1.9% year-on-year in March after rising 1.6% in February.
Economists polled by Reuters had forecast import prices rising 0.5% in April. In the 12 months through April, import prices increased 3.3%, matching March’s gain. With oil prices surging in recent days, economists expect monthly inflation measures to push higher in the coming months.
Crude prices were trading near 3-1/2-year highs yesterday as the prospect of new US sanctions on Iran tightened the outlook for Middle East supply at a time when global crude production is only just keeping pace with rising demand.
President Donald Trump has pulled the United States out of an international nuclear deal with Iran and promised tough sanctions against Tehran. The moderate inflation theme was also highlighted in the University of Michigan’s consumer sentiment survey, which showed households’ inflation expectations over the next 12 months edging up to 2.8% in early May from 2.7% in April.
Their longer-term inflation expectations were unchanged at 2.5%. Another survey from the Philadelphia Fed saw the core PCE price index averaging 2.0% in the second quarter compared to the previous forecast of 1.9%. Inflation was seen averaging 2.1% in both the third and fourth quarters.
“Inflation is running neither too hot nor too cold,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.”It is running just right for rate hikes every other meeting.” The Fed raised interest rates in March and has forecast at least two more hikes for this year.
US stocks were trading higher while prices for US Treasuries fell marginally.
The dollar slipped against a basket of currencies. Last month, prices for imported petroleum rebounded 1.6% after declining 2.2% in March. Excluding petroleum, import prices edged up 0.1% in April after being unchanged in the prior month.
Import prices excluding petroleum rose 1.7% in the 12 months through April.
The cost of imported food fell 0.4% in April, declining for a second straight month, while prices for imported capital goods were unchanged.
The cost of imported motor vehicles nudged up 0.1%. Import prices for nonfuel industrial supplies and materials increased 0.7% after jumping 1.0% in March. They were driven by a 4.0% surge in the prices of iron and steel mill products.
Trump imposed a 25% import tariff on steel in March to shield domestic producers from what he said was unfair competition.
