U.S. Import Prices Rose Slightly in July Despite Lower Fuel Costs
Increase due to higher prices for industrial supplies and food
Import prices, measuring costs for everything from German machinery to Middle Eastern oil, increased 0.1% in July from a month earlier, the Labor Department said Thursday. From a year earlier, prices were down 3.7%. That was the smallest year-over-year decrease since November 2014. Import prices haven’t increased on an annual basis in two years.
“The weaker dollar should ease deflationary pressure on prices of imported consumer goods, but we have yet to see a firm sign of this in the data,” said J.P. Morgan Chase economist Zina Bushra Saijid.
Economists surveyed by The Wall Street Journal expected a 0.2% decrease in July.
Unlike most measures of inflation, import prices aren't adjusted for seasonality. The price of imported goods can influence broader inflation measures, but is rarely the sole driver. The consumer-price index rose 0.3% from a year earlier in June. The Labor Department will release the July CPI reading next week.
Last month’s increase was due to higher prices for non-petroleum imports, including industrial supplies and food. The price of imports excluding petroleum rose 0.5% last month, the largest monthly increase since April 2011. The category is down 1.3% from a year earlier.
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The price of petroleum imports fell 3.6% in July and was down 23.1% from a year earlier.
The price of oil fell sharply from the middle of 2014 until early this year. That pushed down import prices and kept overall inflation near historically low levels. Oil prices at the end of July were slightly above January’s lows. A strong dollar relative to other currencies is another factor depressing import prices in recent years.
Federal Reserve policy makers closely watch inflation measures. The Fed has been counting on inflation to slowly rise as a sign the economy is growing at a healthy pace and can withstand an increase in interest rates, which the central bank has kept historically low since the recession to stimulate growth.
While overall inflation has firmed somewhat in recent months, the central bank’s preferred measure, personal-consumption expenditures price index, has undershot the Fed’s 2% target for more than four years.
Fed officials must weigh improved job creation against soft inflation and lackluster economic growth when they meet next month, and consider raising the benchmark interest rate.
“Inflation remains low,” Federal Reserve Bank of Chicago President Charles Evans said last week. “That’s probably my primary concern.”
Meanwhile, Thursday’s report showed export prices rose 0.2% last month, but fell 3% in July from a year earlier.
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