[WASHINGTON] U.S. import prices recorded their biggest drop in six years in January as the cost of petroleum and a range of other goods fell, a sign that domestic inflation pressures could remain muted for a while.
The Labour Department said on Friday import prices tumbled 2.8 per cent last month, the largest decline since December 2008, after sliding by a revised 1.9 per cent in December. It was the seventh straight month of declines in import prices.
Economists polled by Reuters had forecast import prices falling 3.2 per cent last month after a previously reported 2.5 per cent drop in December.
In the 12 months through January prices declined 8.0 per cent, the largest year-on-year drop since September 2009.
Crude oil prices have plunged nearly 60 per cent since June as increased shale production in the United State and weak global demand caused a glut on the market.
At the same time, the dollar has strengthened significantly against the currencies of the country's main trading partners, helping to pull inflation further away from the Federal Reserve's 2 per cent target.
Despite low inflation, the U.S. central bank is widely expected to start raising interest rates in June, given a rapidly tightening labour market. The Fed has kept its short-term interest rate near zero since late 2008.
Data next week is expected to show producer prices fell for a third straight month in January.
Last month, imported petroleum prices plunged 17.7 per cent, the biggest fall since December 2008, after dropping 12.4 per cent in December. Imported food prices fell 2.2 per cent in January, the largest fall since February 2012.
There were also declines in the prices of imported capital goods, automobiles and consumer goods excluding autos.
Import prices excluding petroleum fell 0.7 per cent last month, the biggest drop since March 2009, after being flat in December.
The Labour Department report also showed export prices fell 2.0 per cent in January, the largest decline since October 2011, after slipping 1.0 per cent in December. A strong dollar is undercutting the competitiveness of US exports.
Export prices fell almost across the board, with prices for non-agricultural goods and for industrial supplies and materials recording their biggest declines since 2008.
Export prices for consumer goods excluding autos saw their largest drop since 2009.
In the 12 months through January, export prices fell 5.4 per cent, the biggest year-on-year decline since September 2009.
Separately, consumer confidence fell in February as gas prices started to rise from a six-year low and damped Americans' optimism about the economy.
The Thomson Reuters/University of Michigan preliminary sentiment index decreased to 93.6 from a final January reading of 98.1 that was the highest since the start of 2004. The median projection in a Bloomberg survey of economists called for no change from last month.