Import prices, which exclude tariffs, fell 1.4 percent in July, the biggest monthly decline since April 2020.
US import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and other costs, while consumers’ one-year inflation outlook dimmed in August, the latest signs that price pressures may have peaked. .
Import prices, which exclude tariffs, fell 1.4 percent last month after rising 0.3 percent in June, the Labor Department said on Friday.
That was the biggest monthly drop since April 2020 and exceeded the 1.0 percent drop expected by economists in a Reuters news agency poll. In the 12 months through July, import prices rose 8.8 percent after a 10.7 percent rise in June, marking the fourth consecutive monthly decline in the annual rate.
The report followed other tentative indications earlier this week that inflation was finally coming off the boil. US consumer prices were unchanged in July due to a sharp drop in the cost of gasoline, after advancing 1.3 percent in June, although underlying price pressures remained elevated. Producer prices also fell last month due to lower energy costs.
“Declining import prices and producer prices support the … thesis that the economy is past peak headline inflation,” said Jeffrey Roach, chief economist at LPL Financial.
The Federal Reserve is considering whether to raise its benchmark overnight lending rate by 50 or 75 basis points at its next monetary policy meeting on September 20-21, while the US central bank targets the percentage. The Fed has raised its policy rate by 225 basis points since March.
Richmond Fed President Thomas Barkin reiterated after Friday’s data that he and his fellow policymakers won’t stop raising rates until they see lasting evidence that price pressures are firmly on the downside.
“I’d like to see a period of sustained inflation under control, and until we do, I think we’re going to have to move rates into tightening territory,” Barkin told CNBC.
Imported fuel prices fell 7.5 percent last month after rising 6.2 percent in June. Oil prices fell 6.8 percent, while the cost of imported food fell 0.9 percent, the biggest monthly drop since November 2020 and the third consecutive monthly drop.
Excluding fuel and food, import prices fell 0.5 percent. These so-called “basic import prices” fell 0.6 percent in June. They rose 3.8 percent year on year in July. The strength of the US dollar is helping to control underlying import prices.
The dollar has gained about 10 percent against the currencies of the United States’ major trading partners since the beginning of the year.
The report also showed that export prices fell 3.3 percent in July after accelerating 0.7 percent in June. Agricultural export prices fell 3.0 percent, with the drop led by lower prices for soybeans, wheat and cotton.
Non-agricultural export prices fell 3.3 percent. Export prices rose 13.1 percent year on year in July after rising 18.1 percent in June.
US consumer confidence rose further in August from a record low earlier this year and US households’ short-term inflation outlook dimmed again due to the sharp drop in gasoline prices, a survey of the University of Michigan.
The preliminary reading for August of the survey of the general index of consumer confidence was 55.1, compared to 51.5 the previous month. It had hit a record low of 50 in June.
The preliminary reading for August was above the median forecast of 52.5 among economists polled by Reuters.
The survey’s one-year inflation expectation fell to a six-month low of 5.0 percent from 5.2 percent, while the survey’s five-year inflation outlook rose to 3.0 percent from 2.9 percent, remaining within the range that prevailed during the past year.