US import prices rose 1.1% month over month in September, exceeding the +0.8% increase forecast and accelerating from an August reading that was revised down to +0.5% from +0.7%. Measured against that lowered base, the September figure represents a steeper acceleration than the original data implied.

Export prices climbed 2.2% on the month versus +1.0% expected, with the prior figure revised up to +1.2% from +0.6%. Year over year, import prices advanced 8.1%, up from a prior reading of 7.0%.

The release caps a week of hot inflation data. Markets appear to be betting the Federal Reserve can tame price pressures by waiting until December, but the scale of imported inflation suggests it will keep working its way through prices for some time. The next round of inflation and trade-price readings due before the Fed's December meeting will be watched for confirmation of September's pace.

How the Indexes Work

The Bureau of Labor Statistics publishes the import and export price indexes monthly, tracking what US buyers pay for foreign goods and services and what foreign buyers pay for American output. The data rarely moves markets on its own but offers a useful gauge of how the dollar, global commodity prices and foreign producer costs feed into the US economy. Because border prices sit upstream of shelf prices, the series is watched as an early indicator of cost pressures before they surface in consumer inflation data.

One notable caveat: import prices exclude tariffs and duties. That makes the series a clean test of whether foreign exporters are absorbing tariff costs or passing them through. The indexes also serve as one of the inputs used to deflate trade in the GDP accounts.

August Details

Import prices rose 0.7% in August, with energy dominating. Import fuel prices were up 26.8% year over year, and natural gas import prices more than doubled, jumping 102.6%. Export prices climbed 8.6% over the 12 months to August. Import prices from China rose 1.0%, the largest monthly gain since the series began in January 2004.

CPI and PPI Context

The September report follows two hot inflation prints this week. Headline CPI rose to 3.7% year over year against expectations of 3.6%, while core CPI came in at 2.6% versus a 2.5% forecast, with a 0.33% monthly gain. Energy jumped 5.2% on the month, and a 9.1% surge in gasoline accounted for more than half of the overall increase.

Producer prices were even hotter. PPI rose 1.3% month over month and 6.3% year over year, far above consensus forecasts of 0.5% and 5.3% — the fastest monthly increase since March 2022 and the highest annual rate since December 2022.

Source: ForexLive