The numbers: The cost of imported goods rose 0.6% in May largely because of higher oil prices and fed into the largest increase in U.S. inflation since the early 1980s.
The increase was somewhat smaller than Wall Street had forecast, however. Economists polled by The Wall Street Journal had estimated a 1% advance.
What’s more, import prices minus fuel actually fell 0.3% in May to mark the first decline since the end of 2020. It remains to be seen if such declines are sustainable, but it’s the first welcome news on inflation in months.
Still, import prices have risen a sharp 11.7% in the past year.
Key details: The cost of imported fuel jumped 7.5% in May and accounted for pretty much the entire increase in import prices.
Prices fell for imported food, drinks, consumer goods and industrial supplies.
Import prices minus fuel are still much higher compared to a year ago, though. They’ve risen 5.9% in the last 12 months.
Export prices jumped 2.8% in May, and they are up 18.9% in the past year.
Big picture: The highest U.S. inflation in 40 years isn’t going to dissipate quickly. The cost of wholesale and consumer goods and services are still rising and it will take time to undo the damage to the economy.
The Federal Reserve plans to raise interest rates sharply by next year to try to tame inflation, but the central bank’s more aggressive stance has raised worries that it could drive the U.S. into recession.
Market reaction: The Dow Jones Industrial Average DJIA, +1.11% and S&P 500 SPX, +1.37% were set to open higher in Wednesday trades.