Import prices in the US edged higher, rising 0.20% in March and turning positive since the 1.30% increase that was last week in May of 2015. But despite the month over month increase, import prices are still weaker, down 6.20% on a year over year basis. Data released by the US labour department today showed a downward revision to February’s print from -0.30% to -0.40%. However, the increase in March underlines the fact that higher oil prices are likely to keep pushing inflation higher. The monthly increase came as petroleum prices gained 6.50% from February. Non-petroleum imports fell 0.20% from the previous month and down 2.70% on a year over year basis.
Today’s data showed that drag from global economic slowdown reflecting the weakness in import prices ranging from capital goods to commodities.
With Oil prices pushing higher and overall posting steady gains in the first quarter of this year, there are signs, albeit still nascent that inflation is likely to move higher. So far, data released from China (2.30%), UK (0.50%), Germany (0.80%), Sweden (0.50%) and Norway (0.50%) has seen a broad increase across the board. Inflation in Norway surged to a 5-year high this week while Swedish inflation surged to a 13-month higher. Today, the ONS released UK’s inflation report which saw consumer prices soaring to a 15-month high, all highlighting the fact that higher Oil prices are the likely reason.
Later this week, US is set to report on its inflation data including the Eurozone and expectations are for an upside surprise if going by the current theme. Furthermore, the recent turn around in inflation could give the BoJ a glimmer of hope which so far has failed to see any signs of inflation rising higher.
With oil prices being key, the markets will no doubt be looking to this weekend meeting in Doha where talks progress on dealing with production freezes. Yesterday, Russia’s energy minister Alexander Novak told journalists that Russia would keep Oil production steady in 2017 at the current rate of 537 – 540 million tonnes while Saudi Arabia is currently heading to the table freezing Oil production at February levels. A successful meeting this weekend could see Oil prices start to turn around. However, with the event being priced in on the basis of this and last week’s rally in Oil prices, failure to reach an agreement could open up downside risks for Oil.