The cost of imports in February saw the biggest jump in 9 months, with the increase due entirely to the rising price of fuels like oil and natural gas. Other import prices remained relatively flat, pointing to tame inflation pressures.
Key Takeaways
- The Import Price Index rose 0.6% in February, driven by a 5% increase in the cost of fuels. January figures were revised upward to 0.1%.
- Imports excluding fuel saw no change in price.
- The cost of imports fell -1.3% annually after a -1.6% drop in January.
The cost of industrial supplies and consumer goods rose marginally in February, although prices for food, beverages, and capital goods declined. Auto prices remained flat. Imported consumer goods excluding food dropped -0.3%. Excluding fuels and food, import prices rose 0.2% in February after a January drop of -0.3%. Core prices are impacted by a stronger dollar.
Prices of Chinese imports dropped 0.7% annually, the biggest decline since October 2017. The flat or reduced prices in most areas are a strong indicator of tame or weak inflationary pressures.
January figures were revised upward to 0.1% from the previously reported -0.5% drop, and February’s result was 0.3% higher than expected. However, for the 12 months through February, import prices have dropped 1.3% following a 1.6% drop in January.
TD 1/2: #USD Likely a reflection of improving oil prices, import prices are expected to have bottomed in Feb following 3m with consecutive declines. Indeed, cons is penciling in import prices to have advanced 0.3% m/m, & -1.5% y/y (slightly up from a 1.7% contraction in Jan).
— Francesc Riverola - FXStreet.com ? (@Francesc_Forex) March 14, 2019
Inflation
Inflation appears to be flat or on the downside, with pressures easing following last summers’ seven-year high. Reports on consumer and wholesale prices are in line with this view.
The rate of inflation gives the Fed the breathing room it needs to make good on its promise to take a patient approach with interest rates this year, and recent comments made by Fed chairman Jerome Powell indicate that there are no upcoming rate hikes in the near future.
Flat interest rates mean cheaper borrowing costs which will in turn stimulate the economy by increasing the affordability of houses and cars as well as business investment.
Market Reaction
Gold prices have ticked downward since the session opened, and moreso following today’s news which points to low inflation pressures and makes interest rate hikes less likely.
Spot gold last traded at $1,295.59/oz, down -0.91% with a high of $1,311.29/oz and a low of $1,293.44/oz. The critical psychological support of $1,300/oz has been broken, and it remains to be seen if the price action of the precious metal will rise above it once again before the close of today’s session.
