WASHINGTON: Prices for imported goods fell in June, a reminder of the strong dollar and soft overseas growth that are constraining the U.S. economy.
Import prices decreased a seasonally adjusted 0.1% in June from a month earlier, the Labor Department said Tuesday. Economists surveyed by The Wall Street Journal had expected import prices to rise 0.1% in June from May.
Over the past year, import prices are down 10%.
The falling cost of oil started dragging import prices down in mid-2014. While fuel prices have since partially rebounded, a stronger dollar and weak overseas demand are now helping push inflation lower.
A stronger dollar effectively makes American exports more expensive while making imports cheaper.
Last month’s shift in import prices reflected a 0.2% drop in nonfuel prices. Over the past year, nonfuel import prices are down 2.3%, the largest decline since October 2009.
The price of fuel imports rose 0.7% and petroleum climbed 0.8%.
In other categories, prices for food and autos fell. While the index for capital goods—machinery, heavy trucks and the like—was flat for the month, it is down 1.7% over the past year, the sharpest decline in more than a decade.
Barclays economist Blerina Uruci said the report highlights subdued import price pressures across the board, though the effects of dollar appreciation are fading.
“We maintain our view that downward pressures on imported core inflation from the lagged effects of a stronger dollar will begin to wane in the third quarter and will be less of a drag on domestic price pressures,” she said.
The price of U.S. exports fell 0.2% in June.
Other measures suggest inflation in the U.S. remains historically weak.
The Commerce Department’s personal consumption expenditures index—the Federal Reserve’s preferred measure of inflation—has undershot the central bank’s inflation goal of 2% for three years. Overall prices were up just 0.2% in May from a year earlier.
The Fed is counting on inflation to gradually rise toward 2%, though official forecasts don’t show it hitting that target before 2017.
“The stronger dollar has pushed down the prices of imported goods, and that, in turn, has put downward pressure on core inflation,” Fed Chairwoman Janet Yellen said last week in a speech.
That has been one reason officials have been hesitant to raise interest rates from near zero, where they have held since December 2008.
“We will be watching carefully to see if there is continued improvement in labor market conditions, and we will need to be reasonably confident that inflation will move back to 2% in the next few years,” Ms. Yellen said.
