Bloomberg News/Landov
The numbers: The cost of imported goods were flat in July, but the yearly rate of increase jumped to the highest level in six and a half years.
The import price index was unchanged in July, the government said Tuesday. Excluding fuel, import prices dropped 0.3% last month.
The rate of import inflation over the past 12 months, however, climbed to 4.8% — the highest rate since February 2012.
If fuel is omitted, the increase was a much smaller and more manageable 1.3%. Still, it was negative just a few years ago.
What happened: The cost of imported oil rose again in July, though by a smaller amount compared to the spring.
The rise in energy prices was more than offset than falling costs of industrial supplies, capital goods, food and drinks. The price of some exports such as soybeans appeared to fall as suppliers sought to sell them quickly before U.S. or retaliatory tariffs took effect. The U.S. has China and other trading partners who’ve responded in kind
Big picture: Inflation has surged over the past year, though from very low levels. Higher oil prices have been the main culprit so far, but tariffs imposed by the Trump White could add to the costs unless a horde of simmering trade disputes are resolved soon.
What they are saying?: “The behavior of import prices and manufactured goods prices over the balance of the year is going to be very trade-war/tariff-tango dependent,” said Ward McCarthy, chief financial economist at Jefferies LLC. “The initial effect of the tit-for-tat tariffs was had a suppressing effect on inflation as evidenced by the weakness in the price of heavily exported goods like soybeans.” DJIA, +0.17%
Market reaction: The Dow Jones Industrial Average DJIA, +0.17% and the S&P 500 SPX, +0.30% rose in Tuesday trades. Stocks had rallied over the past month until the threat of an economic crisis in Turkey halted the momentum.
The 10-year Treasury yield TMUBMUSD10Y, +0.13% fell slightly to 2.88%. The yield has repeatedly flirted with 3% over the past few months, only to slip back on worries about Trump administration policies or more recently the crisis in Turkey.