US import prices post first drop in six months

[WASHINGTON] US import prices fell for the first time in six months in August on declining petroleum and food costs, pointing to a tame inflation environment that could encourage the Federal Reserve to keep interest rates steady next week.

The Labour Department said on Wednesday import prices decreased 0.2 per cent in August after an unrevised 0.1 per cent gain in July. Last month's drop was the first since February.

Economists polled by Reuters had forecast import prices slipping 0.1 per cent in August. In the 12 months through August, import prices fell 2.2 per cent, the smallest decrease since October 2014, after declining 3.7 per cent in July.

Import prices have been constrained by a strong dollar and cheap oil. That, together with sluggish wage growth have left inflation persistently running below the Fed's 2 per cent target.

August's weak inflation reading added to a slowdown in job growth and soft manufacturing and services sectors surveys in reducing the likelihood of an interest rate hike at the Fed's Sept 20-21 policy meeting.

Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before raising interest rates.

The US central bank lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

US financial markets were little moved by the data.

The nation continued to import deflation from China, with the cost of goods imported from that country falling 0.2 per cent. Prices for Chinese imports have not recorded a monthly increase since December 2014.

August's decrease was led by a 1.0 per cent decline in the price of imported communications equipment. There were also declines in the cost of imported goods from Canada, the European Union and Mexico. The cost of imports from Japan, however, rose 0.3 per cent, the largest gain since August 2011.

Imported petroleum prices declined 2.8 per cent last month after decreasing 3.6 per cent in July. Import prices excluding petroleum were unchanged after climbing 0.5 per cent in July.

Prices for imported capital goods were unchanged, while the cost of imported automobiles fell 0.2 per cent. Imported consumer goods prices excluding automobiles slipped 0.1 per cent and the cost of imported food decreased 0.5 per cent last month.

The report also showed export prices fell 0.8 per cent in August. That was the biggest drop since January and followed a 0.2 per cent increase the prior month. Export prices were down 2.4 per cent from a year ago.

REUTERS