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Import Prices in U.S. Fall But Trending Coming to an End

In February, the import prices in the U.S. fell for the eighth consecutive month, pulled down by the declining costs for oil and a host of other goods. However, the decline is slowing down as the rally fades from the dollar and prices of oil begin to stabilize.

On Friday, the Department of Labor said import prices had dropped by 0.3% in February following a decrease of 1% in January.

Prices of imports have fallen in 18 of the past 20 months, reflecting a strong dollar and the plunging prices of oil.

For the 12 months up through the month of February, imports were down 6.1%, the smallest drop year on year since December of 2014.

The weak prices of imports have contributed to keeping inflation far below the 2% target of the Federal Reserve.

We feel strongly that the peaks in both core and overall disinflation pressures are now behind us, said one economist in Wall Street.

The import deflation will likely end as the appreciation of the dollar loses some of its steam following its gain of over 20% against a basket of worldwide currencies of the main trading partners with the U.S. from June of 2014 to December of 2015.

Thus far, in 2016, the dollar has only strengthened by 0.9% on a basis that is trade weighted. Meanwhile, the prices of oil have shown some tentative signs of becoming stable.

Should the two trends continue prices of imports could begin to rise soon, which would help to push up inflation domestically.

Reports in February showed a wide ranging increase in prices during January, raising the optimism amongst economists that domestic inflation would increase toward the target rate of the Fed and allow the central bank to continue its gradual interest rates increases during the year.

The central bank raised its key interest rate for overnight lending this past December for just the first time in close to one decade. Economist forecasted that import prices would slip by 0.6% in February.

Imported food dropped 2% in February, the biggest drop since February of 2012, while the prices of industrial supplies as well as material excluding oil dropped by 0.3%.

Imported capital goods prices did not change and the cost of automobiles imported dropped by 0.1%. Prices of consumer goods imported excluding automobiles move up 0.3%.

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