US Import Prices Fall, but Downward Trend Nearing End

The Labor Department said on Friday import prices slipped 0.3 percent last month after a 1.0 percent decrease in January. Import prices have decreased in 18 of the last 20 months, reflecting a robust dollar and plunging oil prices.

They were down 6.1 percent in the 12 months through February, the smallest year-on-year drop since December 2014. Weak import prices have contributed to holding inflation below the Federal Reserve's 2 percent target.

"We strongly feel that the peaks in both overall and core disinflation pressures are behind us," said John Ryding, chief economist at RDQ Economics in New York. 

The import deflation is likely close to an end as the dollar's appreciation loses some steam after the greenback gained about 20 percent against the currencies of the United States' main trading partners between June 2014 and December 2015.

So far this year, the dollar has strengthened about 0.9 percent on a trade-weighted basis. At the same time, oil prices have also shown tentative signs of stabilizing. Should these trends continue, import prices could start to rise soon and help to push up domestic inflation.

"Prospects of higher oil prices and slower dollar appreciation should help keep this improving trend intact," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Reports last month showed a broad pick-up in prices in January, raising optimism among economists that inflation will rise toward the Fed's target and allow the U.S. central bank to continue gradually raising interest rates this year.

The Fed increased its key overnight interest rate in December for the first time in nearly a decade. Economists had forecast import prices slipping 0.6 percent last month.

U.S. financial markets were little moved by the data, taking their cue from firming oil prices. Stocks on Wall Street were trading higher, while prices for U.S. Treasury debt fell. The dollar was flat versus a basket of currencies. Last month, imported petroleum prices fell 4.0 percent after plummeting 14.3 percent in January. Import prices excluding petroleum dipped 0.1 percent after being unchanged in January.

Imported food prices fell 2.0 percent last month, the largest drop since February 2012, while prices for industrial supplies and materials excluding petroleum slipped 0.3 percent.

Prices for imported capital goods were unchanged and the cost of imported automobiles fell 0.1 percent. Prices for imported consumer goods excluding autos rose 0.3 percent. The report also showed export prices fell 0.4 percent in February after sliding 0.8 percent in January. Export prices were down 6 percent from a year ago.

Export prices for industrial supplies and materials fell 2.0 percent. Prices for food exports rose 0.9 percent.