U.S. total import prices came in better than anticipated in February. On a sequential basis, total import prices rose 0.6 percent, as compared with consensus expectations of a rise of 0.3 percent. The upside surprise was driven by unexpected strength in non-petroleum import prices that rose 0.1 percent. Petroleum prices were up 4.7 percent, a second straight solid rise, in line with the recovery in energy prices after the sharp declines seen at the end of last year. At the other subcomponents level, the February report was a mixed bag. Imported foods and capital goods prices dropped, and autos came in flat. Nevertheless, prices of consumer goods ex-autos and industrial supplies excluding fuels rose strongly.
The annual trend in imported inflation has softened considerably in the last eight months, falling from 4.8 percent year-on-year in July 2018 to its current -1.3 percent. Some of that was a direct result of the drag from energy prices, with annual petroleum inflation shifting from 44.6 percent in July 2018 to -7.9 percent currently. However, the direction of travel toward weaker imported inflation is seen even in less-volatile measures such as import prices excluding fuels or food. The rate of imported inflation has decelerated for capital goods, autos and consumer goods ex autos. Imported inflation from China continued to be subdued at 0 percent sequentially and -0.7 percent year-on-year. Prices from Canada and Mexico rose in February.
“We think the sharp drop in China PPI is likely spilling over to US import prices. There is also some anecdotal evidence that in response to tariffs from the US, Chinese firms may be lowering prices in order to remain competitive in the US market”, said Barclays in a research report.
At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 1.42041 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex