By Anna Louie Sussman
WASHINGTON — The price of foreign imports to the U.S. fell in August as petroleum prices declined, a sign historically low oil prices continue to weigh on inflation.
But the decrease from year-ago prices was the smallest since October 2014 and has been generally dwindling each month, suggesting prices of overseas goods could be slowly stabilizing as the strength of the U.S. dollar fades.
"In spite of the month-to-month volatility, we view the underlying trend in imported deflation as improving and consistent with a gradual waning of the drag from the stronger dollar and lower global commodity prices," said Blerina Uruci, an economist at Barclays Bank PLC.
Import prices, measuring costs for everything from Mexican vegetables to Japanese cars, fell 0.2% in August from a month earlier, the Labor Department said Wednesday.
Economists surveyed by The Wall Street Journal expected a 0.1% decrease in August.
From a year earlier, import prices were down 2.2% in August. Compare that to August 2015, as oil was on its downward slide. Import prices then had stood 11.4% below their year-ago level.
Import prices haven't increased on an annual basis in over two years, thanks largely to oil prices that tumbled in mid-2014 and are still far from the above $100-a-barrel prices that reigned for the prior three years. Excluding petroleum, prices of all other imports were flat in August from July.
Another factor has been the strength of the U.S. dollar, which has dissipated since the end of last year, save for a brief rally following the Brexit vote.
"Though the August reading was softer than expected, the trend in nonfuel import prices has improved in recent months as the drag from earlier increases in the dollar has faded," said Zina Bushra Saijid, an analyst at J.P. Morgan Chase & Co.
Import prices tend to be more volatile than broader consumer prices. After declining in 2015 and early this year, the price index rose for five straight months until August. But non-petroleum import prices have only risen twice on a monthly basis since early 2014, in May and July of this year.
In July, import prices rose 0.1% from the prior month. Unlike most measures of inflation, import prices aren't adjusted for seasonality.
August's decrease was led by a fall in petroleum prices. The price of petroleum imports fell 2.8% in August and was down 12.9% from a year earlier. Global crude oil prices in August ranged from around $40 to $50, well above lows under $30 a barrel reached in the early months of the year, according to the Energy Department.
Prices for non-petroleum industrial supplies rose 0.6% in August and foods, feeds and beverage prices were down 0.5%. Prices for imported vehicles and parts fell 0.2% for the second straight month.
Federal Reserve officials, who meet Sept. 20-21 to discuss monetary policy, have been watching for signs of inflation. The Fed has been counting on inflation to slowly rise, indicating 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.
The price of imported goods can influence broader inflation measures, but aren't the only factor. The consumer-price index rose 0.8% from a year earlier in July. The Labor Department will release the August CPI reading on Friday.
The central bank's preferred measure of inflation, the personal-consumption expenditures price index, has undershot the Fed's 2% target for more than four years.
On Monday, three Federal Reserve officials suggested in separate speeches and an interview they're in no hurry to raise short-term interest rates at their policy meeting next week. Fed governor Lael Brainard said in a speech the central bank's caution on rates "has served us well in recent months, helping to support continued gains in employment and progress on inflation." But she noted that strong employment gains haven't yet pushed up wages and inflation as much as would have been expected in the past.
Their comments appeared to contrast with those of other officials who have suggested in recent weeks they could consider a Fed rate increase this month. Together, they suggest a lack of consensus on whether to move at their next meeting.
Meanwhile, Wednesday's report showed export prices fell 0.8% in August, the largest drop since January, as prices fell for both agricultural exports and nonagricultural exports such as cars and capital goods. Overall export prices were down 2.4% in August from a year earlier.
The Labor Department report on import and export prices can be accessed at: http://www.bls.gov/news.release/ximpim.toc.htm.
Write to Anna Louie Sussman at firstname.lastname@example.org
(END) Dow Jones Newswires
September 14, 2016 10:37 ET (14:37 GMT)
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