Import prices rose more thant forecast in August, gold hits a record high: Yep, inflation is the real danger

Import prices rose 0.6% in August, a larger increase than forecasts. Nonpetroleum import prices rose 0.2% in August and prices excluding fuels increased by 0.3%. Over the last year, nonfuel import prices have posted a 2.9% increase.

BOTTOM LINE

Both overall and core import prices ran ahead of expectations in August, which put core input price increases around 3% over the last year. One notable area of gains, which should be a theme strongly echoed in the consumer price data over the next few months, is the pickup in food prices. Although the month-to-month price changes are not seasonally adjusted, it appears that price increases were fairly broad-based in August. Once again, there is no evidence for the deflation thesis.

In case you are wondering if import prices are rising, it is a good indicator that your currency is weakening.  And right on cue comes gold.  Gold hit a record high of $1,270 per ounce yesterday and has largely held onto these gain today. We firmly believe that inflation rather than deflation remains the greater risk over the medium term.

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