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Import Prices Rise 0.4%, Exports 0.2%: Bond Yields Mostly Yawn

Those looking for a bit of inflation can point to import prices and a weak dollar, but the bond market barely reacted.

U.S. import prices up 0.4% in February on higher nonfuel prices; export prices rise 0.2% according to the BLS report on Import and Export Prices.

  • All Imports: The price index for U.S. imports rose 0.4 percent in February, the seventh consecutive monthly increase, after advancing 0.8 percent in January. The last time the index declined on a monthly basis was a 0.2-percent drop in July 2017. Import prices advanced 3.5 percent for the 12-month period ended in February, matching the 12-month rise in November. Those were the largest annual increases since the index rose 3.6 percent for the 12-month period ended April 2017.
  • Fuel Imports: The price index for fuel imports declined 0.6 percent in February, the first monthly decline since July. Prior to February, the index for fuel imports rose 29.1 percent between July 2017 and January 2018. Both petroleum and natural gas prices contributed to the decline in overall fuel prices in February. Petroleum prices fell 0.5 percent and prices for natural gas decreased 3.0 percent. Despite the February decline, the price index for fuel imports rose 17.4 percent over the past 12 months. Petroleum prices increased 18.3 percent for the year ended in February and prices for natural gas advanced 17.9 percent over the same period.
  • All Imports Excluding Fuel: The price index for nonfuel imports advanced 0.5 percent in February, after rising 0.5 percent the previous month. The last time the index increased by more than 0.5 percent was a 0.8- percent advance in April 2011. Prices for capital goods; consumer goods; nonfuel industrial supplies and materials; foods, feeds, and beverages; and automotive vehicles all contributed to the February advance. The price index for nonfuel imports increased 2.1 percent over the past 12 months, the largest over-the-year rise since the index advanced 2.4 percent for the year ended February 2012. The primary contributor to the 12- month advance in February was higher prices for nonfuel industrial supplies and materials.

Export Prices

Import vs Export Prices

Exports add to GDP and imports subtract. These numbers expand the deficit subtract from GDP.

Bond Yields Yawn at Inflation Prospect

The 30-year bond yield barely budged. The largest reaction was in the 2-year note, flattening the curve.

Mike "Mish" Shedlock

As The Bernank used to say, "Transitory".

I dunno, Kudlow says to short Au and go long the dollar. The gumnut must know best.

Well if Trump gets his trade war then import prices will be going up 30% (hooray for GDP) and this will seem small potatoes.

As for treasury bonds, it's a zero risk market because every investor knows the Fed will do what it takes. So what these movements in yields mean is never clear.

Gold is in the long run the big winner, but the thing about gold right now is that an awful lot of people bought it in expectation of continued rise in inflation and subdued interest rates. And what they're finding is no inflation and rising LIBOR. :/

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