In July, the rest of the world once again succeeded in exporting its deflation to the US, confirmed by a -0.2% drop in the Import Price Index, its first decline since April following a 0.1% increase in June, if just a fraction better than than the -0.3% consensus.This was also a 0.8% increase Y/Y, suggesting June may have been a Y/Y top following 5 consecutive months of annual increases.

The key drivers for the decline: Fuel imports as well as car prices. To wit: the price index for import automotive vehicles declined 0.8 percent in July, the first monthly decrease for the index since a 0.1-percent decline in February and the largest 1-month drop since the index fell 1.1 percent in December 1992. Why? Because foreign car sellers have no choice but to slash prices to compete with the US subprime flood making domestic car prices effectively "free."

The full breakdown:

All Imports: Overall import prices fell 0.2 percent in July, the first monthly decline for the index since a 0.6-percent drop in April. Import prices ticked up 0.1 percent in June and rose 0.3 percent in May. The price index for overall imports advanced 0.8 percent over the past 12 months, a similar movement to the 0.9-percent increase from July 2012 to July 2013. Both higher fuel and nonfuel prices contributed to the most recent year-over-year increase, in contrast to the rise for the year ended in July 2013 which was driven solely by higher fuel prices.

Fuel Imports: Import fuel prices fell 1.2 percent in July, after rising 1.0 percent in June and 1.3 percent in May. The July decrease was led by a 1.2-percent drop in petroleum prices which more than offset a 1.8-percent increase in natural gas prices. Despite the July decline, import fuel prices rose 2.6 percent over the past year, after increasing 7.7 percent between July 2012 and July 2013. A 1.7-percent rise in petroleum prices and a 44.1-percent jump in natural gas prices both contributed to the year-over-year increase for fuel prices in July.

All Imports Excluding Fuel: Nonfuel prices were unchanged for the third time in the past 4 months in July, after edging down 0.1 percent in June. The price indexes for nonfuel industrial supplies and materials; foods, feeds, and beverages; and consumer goods all rose in July, but lower automotive vehicles prices offset the increases. Capital goods prices were unchanged. Prices for nonfuel imports advanced 0.4 percent for the year ended in July, led by 0.3-percent increases in March and January.

And selected highlights:

Imports by Locality of Origin: Import prices from China fell 0.2 percent in July, the largest monthly decline since a 0.6-percent drop in May 2013. The July decrease was led by a 0.2-percent decrease in computer and electronic products prices. Despite the July decline, prices for imports from China advanced 0.3 percent over the past year. The price index for imports from Japan decreased 0.3 percent in July, after recording no change the previous month. Import prices from Japan have trended down since the end of 2012 and fell 1.6 percent over the past 12 months. Prices for imports from Mexico and Canada also declined in July, decreasing 0.4 percent and 0.2 percent, respectively. In contrast, import prices from the European Union ticked up 0.1 percent in July.

Nonfuel Industrial Supplies and Materials: Nonfuel industrial supplies and materials prices increased 0.5 percent in July following a 0.2-percent decline in June. The July advance was driven by 5.8-percent rises in the price indexes for gold and other precious metals.

Finished Goods: The price index for import automotive vehicles declined 0.8 percent in July, the first monthly decrease for the index since a 0.1-percent decline in February and the largest 1-month drop since the index fell 1.1 percent in December 1992. The July decline was driven by a 1.1-percent drop in passenger car prices. In contrast, consumer goods prices ticked up 0.1 percent in July, after recording no change in each of the 2 previous months. Capital goods prices were unchanged in July.

Foods, Feeds, and Beverages: Prices for foods, feeds, and beverages rose 1.0 percent in July following a 1.6-percent decrease in June. Higher prices for meat, alcohol, coffee, and vegetables all contributed to the increase in July.

Transportation Services: Import air passenger fares decreased 2.8 percent in July, the first monthly drop since a 3.4-percent decline in March. The July decrease was led by a 5.3-percent decline in European fares. Despite the July drop, import air passenger fares increased 2.6 percent over the past 12 months. Import air freight prices decreased 0.3 percent in July, but rose 1.8 percent over the past year.

So for now, the US inflation story is helped by imports of deflation from everywhere else around the world, mostly Europe and Japan. Then again considering Abe's popularity rating just dropped to the lowest since 2012, the likelihood that Japan will continue to exports its deflation to the US for much longer has reduced dramatically.