U.S. imported inflation continues to rise in September

U.S. import prices rose 0.3 percent sequentially in September, with the rate of rises moderating slightly after four straight months of brisk monthly inflation. Imported petroleum prices dropped sharply in September after rising at a solid rate throughout the summer. Outside of the energy component, price pressures were strong, with import prices excluding petroleum rising 0.6 percent sequentially on account of healthy inflation in foods, non-energy industrial supplies and durable goods.

Underlying imported inflation has bolstered slowly since May. On a year-on-year basis, imported inflation came in at 1.8 percent from a low of -1.1 percent in April, staging a solid turnaround since the depths of the pandemic.

“We believe that the improved momentum in imported inflation reflects in part the strong rise in import volumes in recent months (given the broader recovery in activity), as well as the recent depreciation of the dollar”, said Barclays in a research report.

As the initial surge in activity from pent-up demand settles, upside pressures on import prices are expected to diminish slightly. The tailwind from the softer dollar is expected to remain supportive given the Fed’s outlook for maintaining an accommodative monetary policy stance for a prolonged period.

“On the downside, we believe that past the initial rebound the recovery remains somewhat challenging and the global macro backdrop will likely prevent underlying imported inflation from rising at the recent robust monthly pace in the coming months”, added Barclays.