Import prices were unchanged on the month in June after falling 0.2 percent in May for an annual inflation rate of 1.6 percent. Though subdued and up only slightly from 1.4 percent in May, June's annual rate is the highest since December 2022. Export prices fell 0.5 percent on the month in June with this annual rate up slightly from May's 0.5 percent to 0.7 percent.

Looking first at imports, energy isn't skewing the results as the monthly reading excluding fuels is up 0.2 percent for an annual rate of 1.0 percent. Petroleum prices fell 1.2 percent in June for the first monthly decline since December 2023. Import prices for agricultural commodities have been showing the most pressure, up 0.8 percent on the month for a 9.0 percent annual rate. Vegetables and green coffee rose in June offsetting a decline for fruits. Prices for imported finished goods are mostly flat yet prices of imported autos, though only 0.1 percent higher on the month, are up 2.5 percent on the year.

Export prices for agricultural commodities did rise 0.6 percent in June though this annual rate, in contrast to the import side, is down 4.8 percent on the year. Nonagricultural commodities fell 0.6 percent on the month for a 1.4 percent annual inflation rate. Finished goods were flat on the month with autos showing the highest annual rate at 4.0 percent.

After emerging from contraction earlier in the year both import and export prices are holding near the zero-line with only a slight upside bias, pointing to steady cross-border trade with no striking imbalances and not posing much risk to the inflation outlook.

Import prices in June are expected to slip 0.1 percent versus a 0.4 percent decline in May. Export prices, which fell 0.6 percent in May, are seen falling another 0.1 percent. This report has been flat to disinflationary.

Import price indexes are compiled for the prices of goods that are bought in the United States but produced abroad and export price indexes are compiled for the prices of goods sold abroad but produced domestically. These prices, which exclude tariffs and taxes, measure underlying inflationary trends in internationally traded products.

Changes in import and export prices are a valuable gauge of inflation here and abroad. Furthermore, the data can directly impact the financial markets such as bonds and the dollar. The bond market is especially sensitive to the risk of importing inflation because it erodes the value of the principal (the original investment) which is paid back when the bond matures. It also decreases the value of the steady stream of interest rate payments on this type of security. Inflation leads to higher interest rates and that's bad news for stocks, as well. By monitoring inflation gauges such as import prices, investors can keep an eye on this menace to their portfolios.