Import prices rose 1.1% in September as factory output edged back up

Overall US import prices rose 1.1% in September after a 0.5% increase in August, the Bureau of Labor Statistics said². The figure came in above the 0.8% that had been expected, against a previous reading of 0.5%³. The BLS published the September import and export price indexes on Friday¹.

On the output side, US manufacturing production was reported at 1.1% on a year-on-year basis, up from 0.9%⁵. Capacity utilisation for September came in at 76.9%, above the 76.5% expected and the 76.4% previously recorded⁶. Trading Economics described factory output as recovering slightly, in line with forecast⁴.

The counterweights

Not every series improved. The New York Fed’s services activity index for October fell to -20.7 from -8.7, a sharp deterioration⁷. Econbrowser’s review of business cycle indicators described industrial production as up while retail sales were flattish⁹.

Business inventories rose moderately in August, but the restocking effort is mostly reliant on imports, which are a drag on GDP growth⁸. Newsquawk noted that a hot month-on-month import reading matters for consumer inflation, and that the relevant distinction is between currency-driven moves and commodity or tariff effects³. That distinction decides how much of the September figure is likely to persist, and none of the releases in this pack settles it^2,3.

Econbrowser’s chart set tracks payroll employment, civilian employment, industrial production, personal income excluding current transfers, manufacturing and trade sales, and monthly GDP together, and the picture it describes is one of production rising while the consumer series stay flat⁹. Newsquawk also reported the Federal Reserve’s balance sheet at $6.756 trillion, against $6.748 trillion previously⁵.

Why it matters to investors

Imported goods prices feed into the consumer basket with a lag, so a reading above forecast narrows the room for the argument that price pressure is fading on its own^2,3. At the same time, higher capacity utilisation removes slack from the economy, and Newsquawk noted that the utilisation figure feeds into the Federal Reserve’s assessment of resource slack⁶.

The combination in these releases is an economy that is producing more while paying more for what it brings in. The services survey is the outlier in the set, with the New York Fed index deteriorating while production improved^5,7. None of the releases in this pack carried a policy decision; they are inputs to one. Investors watching the October rate debate have two hard-data readings that argue for caution on cutting and one survey that argues the opposite^6,7.