US import prices post largest drop in eight months
Import prices fell 0.3% last month, the largest decline since December 2023, after an unrevised 0.1 per cent gain in July
US IMPORT prices dropped by the most in eight months in August amid lower costs for a broad range of goods, suggesting that domestic inflation will continue to subside in the months ahead.
The report from the Labor Department on Friday (Sep 13) followed on the heels of data this week showing mild increases in producer and consumer prices in August, though some stickiness remained in underlying inflation. With price pressures ebbing, the Federal Reserve is now focused on the labour market, which has slowed considerably from last year’s robust job growth.
“The inflation flare-up early in the year is no longer evident in the prices of imported goods coming into the country and this is another reason to believe that the balance of risks have shifted for Fed officials back to downside risks for the economy and labour market from the inflation risks earlier this year,” said Christopher Rupkey, chief economist at FWDBONDS.
Import prices fell 0.3 per cent last month, the largest decline since December 2023, after an unrevised 0.1 per cent gain in July, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had expected import prices, which exclude tariffs, would fall 0.2 per cent.
In the 12 months through August, import prices increased 0.8 per cent after advancing 1.7 per cent in July.
The US central bank is expected to kick off its long-awaited easing cycle next Wednesday, with a 25-basis-point interest rate cut almost assured. Financial market expectations for a half-percentage-point reduction have been dashed by labour market stability and still-warm core inflation readings.
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The Fed has maintained its benchmark overnight interest rate in the current 5.25 per cent-5.50 per cent range for more than a year, having raised it by 525 basis points in 2022 and 2023.
Imported fuels prices dropped 3.0 per cent last month, with petroleum products decreasing 3.2 per cent. Prices for fuels increased 1.1 per cent in July. Food prices dipped 0.1 per cent after surging 1.5 per cent in July.
Excluding fuels and food, import prices slipped 0.1 per cent. These so-called core import prices were unchanged in July. The dollar’s strength against the currencies of the United States’ main trade partners has largely kept imported inflation contained. Core import prices rose 1.1 per cent year-on-year in August.
Prices of imported industrial supplies and materials excluding petroleum fell 0.4 per cent. Imported capital goods prices edged up 0.1 per cent, lifted by non-electrical machinery. Prices for imported motor vehicles and engines were unchanged after increasing 0.4 per cent in July.
The cost of imported consumer goods, excluding automotives, declined for a third straight month, with nonmanufactured consumer goods dropping 2.0 per cent.
Prices for Chinese imports decreased 0.2 per cent after being unchanged for five straight months. They dropped 1.4 per cent year-on-year in August. The cost of goods imported from Canada declined 1.4 per cent, the most since December 2023. Prices of goods imported from Mexico fell 0.3 per cent. But prices for goods imported from the European Union rebounded 0.2 per cent after declining 0.4 per cent in July.
The report also showed export prices falling 0.7 per cent last month after rising 0.5 per cent in July. Prices for both agricultural and nonagricultural exports dropped last month. There were decreases in the prices of soybeans, corn, wheat and fruit. Prices for industrial supplies and materials as well as capital goods declined, more than offsetting higher prices for consumer goods, motor vehicles and nonagricultural foods.
Export prices fell 0.7 per cent year-on-year in August after increasing 1.2 per cent in July. REUTERS
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