Prices for U.S. imports were unchanged in May after edging up 0.1 percent in April, contrary to expectations of a 0.3 percent monthly decline an Econoday survey of forecasters. Import prices increased 0.2 percent year-over-year after 0.1 percent in April.

Export prices, down 0.9 percent, had not declined that much since a similar drop in October 2023. Still, the 12-month index remained on a downward trend with a growth rate of 1.7 percent after 1.9 percent in April.

Driven by lower petroleum and natural gas prices, fuel import were down 4.0 percent on the month in a third consecutive decrease, for a 12-month drop of 15.7 percent, the largest decline since September 2024.

By contrast, nonfuel import prices increased another 0.3 percent on the month and 1.7 percent year-over-year, up from 1.2 percent in April. Prices for industrial supplies and materials, capital goods, consumer goods, and automotive vehicles all increased on the month. It remains to be seen if the 12-month uptick is the overall import price index is starting an upward trend in light of the non fuel import price data.

On the export front, the monthly decline was driven by a 1.0 percent retreat in non-agricultural export prices on the month, while the agricultural index was up 0.2 percent.

Overall, while the headline import price index didn't decline as expected, it is still indicating limited upward pressure. In May, producer prices were up 0.1 percent on the month, for a 2.6 percent year-over-year advance. The monthly increase was smaller than expected but the report did contain evidence of wholesalers passing along some the cost of the higher tariff rates imposed in April.

At the consumer level, inflation was cooler than expected in May and slowed down to 0.1 percent from 0.2 percent in April.

Businesses will have to continue to assess how to react to tariffs in their pricing decisions given that tariffs are a source of upward price pressure but also of uncertainty creating headwind for economic activity.

Import prices are expected down 0.3 percent and export prices down 0.1 percent on the month in May after both rose 0.1 percent in April.

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.