It’s been all about prices lately, and it’ll continue to be about prices for some time.
The update du jour on that front is import prices, which have surged higher by nearly 18% for the year through May, the Bureau of Labor Statistics reports. On a monthly basis, the trend looks a bit less threatening. Import prices rose by 2.3% last month, down a bit from April’s 2.4%. The trend looks even better if we exclude prices of petroleum imports, which continue to climb into uncharted territory. Even so, non-petroleum import prices are up 6.6% for the year through May, reminding that the U.S. continues to import inflation.
For comparison, domestic inflation is up by a relatively mild 3.9% for the 12 months through April, with an update for May scheduled for release tomorrow. It doesn’t take a lot of math to figure out that the more this country imports, the stronger the pressure is for higher prices in everything from onions to oil.
Any way you slice it, prices generally are rising. The Federal Reserve’s position to date has been more or less to hope that the slowing economy would take the edge off the pricing pressure. As we’ve long argued, that’s an especially risky policy for this economic cycle. Much has changed in 2008 compared to recessions past, and so waiting for aid in the form of slowing or slumping demand may not do the trick this time around.