Computer Import Prices Surge 7.4%, Adding to US Inflation

Import prices of manufactured goods rose 4.2% in the first six months of 2024, pushed to a new record high, the Bureau of Labor Statistics reported Friday. The year-over-year increase reached 5.0%. The biggest single driver: computers and electronic products, where import prices jumped 7.4% over the half and 8.0% from a year earlier.

The move marks a sharp break from the long-term trend. Between 2006 and 2019, the import price index for computers and electronic products fell nearly 30%. Those goods were a significant deflationary force in the US economy for more than a decade. The first disruption came during the 2021-2022 supply chain crisis, when chip shortages and pandemic-era demand pushed prices higher. The current surge is far larger, Wolf Street noted, citing the AI investment boom.

Companies with large cash piles – including big tech firms and startups funded through debt and equity – are competing for semiconductors, servers, and other electronic components. Manufacturing capacity is constrained, Wolf Street analysts wrote. The result is that import prices for these goods are rising faster than at any point in the past decade.

Other parts of the import basket send mixed signals. Fuel import prices shot up through May then plunged in June. The US is the world's largest producer of crude oil and natural gas and runs a trade surplus in energy, so higher fuel export prices benefit the economy overall. Nonmonetary gold prices spiked last year but have since dropped, with limited domestic effect. The manufactured goods category, which accounts for roughly $2.9 trillion of annual US imports, is where the inflation risk is concentrated.

There are already signs that these higher import costs are migrating to consumer prices. Wolf Street pointed to reports of price increases in smartphones, laptops, appliances, and other gadgets. The pass-through from corporate AI spending to consumer goods could prolong the current inflation cycle, especially if semiconductor demand continues to outstrip supply.

For the Federal Reserve, the question is whether this second wave of import-driven inflation will be as persistent as the first. The 2021-2023 wave was driven by broad supply chain disruptions and demand. This wave is narrower – concentrated in tech hardware – but it is backed by enormous capital spending plans from companies like Microsoft, Amazon, and Alphabet. Their AI infrastructure buildouts show no sign of slowing in the near term, Wolf Street said.

The next import price report is scheduled for Aug. 14.