NEWYORK: Prices of imported goods fell broadly last month, raising the likelihood that inflation will remain subdued in coming months amid a limping global economy.
Import prices fell 0.3% in March from February, the eighth decline in nine months, the Labor Department said Friday. Prices have fallen 10.5% over the past year, largely reflecting last year’s slide in oil prices that has since stabilized.
Last month’s drop came entirely outside of oil, reflecting lower prices for everything from capital goods such as computers to industrial supplies to automobiles. Nonpetroleum import prices fell 0.4% last month and are down 2.7% over the past year—the biggest 12-month drop since fall 2009.
Even as oil stabilizes, prices in the U.S. are coming under pressure from stimulus efforts by global central banks that have weakened foreign currencies against the U.S. dollar. A stronger dollar makes foreign goods cheaper in the global market.
Recent dollar strength indicates that core import prices are likely to be under considerable downward pressure in the months ahead,” Joshua Shapiro, chief U.S. economist of MFR Inc., said in a note to clients. “This will help to keep prices of goods at the consumer level under wraps.”
Many economists expect inflation to remain low in coming months but slowly pick up later this year. The Federal Reserve, which is debating when to raise short-term interest rates, is looking for higher inflation as a sign the economy is strengthening and can withstand higher rates.
The most closely watched measures of inflation—consumer-price gauges by the Labor and Commerce departments—show prices continue to grow slower than the Fed’s 2% target.
Some of the weakness in inflation likely reflects continuing slack in labor and product markets,” Fed Chairwoman Janet Yellen said in a speech in San Francisco last month. “However, much of this weakness stems from the sharp decline in the price of oil and other one-time factors that, in the FOMC’s judgment, are likely to have only a transitory negative effect on inflation, provided that inflation expectations remain well anchored.”
Friday’s report showed that the price of imported oil, which had brought down the overall index since last summer, picked up last month. Petroleum import prices rose 0.8%.
