US import prices unexpectedly fall in May
US IMPORT prices fell for the first time in five months in May amid lower prices for energy products, providing another boost to the domestic inflation outlook.
The unexpectedly benign report from the Labor Department on Friday (Jun 14) combined with data this week showing tame inflation readings last month to keep a September interest rate cut from the Federal Reserve on the table.
Signs that inflation is subsiding have, however, failed to lift spirits among Americans, with a survey on Friday showing consumer sentiment dropping to a seven-month low in June. The US central bank on Wednesday pushed out the start of rate cuts to perhaps as late as December, with policymakers projecting only a single quarter-percentage-point reduction for this year.
“Fed officials did not see what they were hoping for in the inflation trend when they met earlier this week, but the winds of change are coming for those bearish inflation outlooks,” said Christopher Rupkey, chief economist at FWDBONDS.
“We would not rule out a first rate cut in September. The decline in imported goods prices will surely be welcomed by inflation-weary consumers.”
Import prices dropped 0.4 per cent last month after an unrevised 0.9 per cent surge in April, the Labor Department’s Bureau of Labor Statistics said. That was the first decline in import prices since December. Economists polled by Reuters had expected import prices, which exclude tariffs, to edge up 0.1 per cent.
In the 12 months through May, import prices increased 1.1 per cent, matching April’s rise. Imported fuel prices dropped 2.0 per cent in May after advancing 4.1 per cent in April. There were sharp decreases in the prices of crude petroleum and natural gas.
The cost of imported food plunged 1.6 per cent after rising 1.3 per cent in April. Prices for imported capital goods fell 0.1 per cent last month, reversing April’s 0.1 per cent gain. The cost of motor vehicles, parts and engines dipped 0.1 per cent after rising 0.4 per cent in April.
Imported consumer goods prices fell 0.2 per cent, declining for a third straight month.
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Excluding fuels and food, import prices fell 0.2 per cent. These so-called core import prices jumped 0.6 per cent in April. They had popped up despite the US dollar strengthening against the currencies of the US’ main trade partners this year.
Core import prices gained 0.1 per cent year on year in May. REUTERS
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