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First Cut: Import Price Index for July rides higher on petroleum prices

The Import Price Index was up 0.2% in July from June when it was down 1.1%. The increase was due to a 1.9% increase in imported petroleum costs. The rise in petroleum more than offset declines in coal (-3.1%)  and natural gas (-1.4%). Excluding petroleum, the index was flat.

Overall import prices were lower year-over-year for a third straight month. The Import Price Index was down 1.8% compared to July 2018, and excluding petroleum down 1.3%.

Prices for import finished goods were mixed, but on net were lower. Capital goods prices were down 0.1%, autos and parts were down 0.3%, while consumer goods excluding autos were up 0.2%. Compared to a year-ago, capital goods were down 3.3%, autos and parts off 0.8%, and consumer goods excluding autos down 0.6%.

Import prices for commodities are providing little or no upward price pressures to the US economy. The FOMC will have to look elsewhere — read services — if inflation is going to warm up enough to get back to the Fed’s 2% objective, especially if steady increase in wages and benefits continue to not leak into overall inflation conditions.

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