WASHINGTON: Declining prices for imports, even beyond oil, appears likely to exert downward pressure on inflation in the U.S. well into this year.
Import prices fell 1.2% in December from the prior month, the Labor Department said Thursday. It was the sixth straight monthly decline. From a year earlier, import prices were down 8.2% in December. The year-over-year figure has declined for 17 consecutive months.
“Economic weakness in many emerging markets, combined with the recent further declines in commodity prices and ongoing appreciation of the dollar, is likely to keep import prices from emerging markets declining for some time,” Barclays economist Rob Martin in a note to clients.
The “pass-through to consumer prices is the major driver of our soft consumer price inflation forecast for this year.” Swiftly falling oil prices are the primary culprit for declining import costs.
Imported petroleum prices fell 10% in December—the largest monthly decline since August. Imported oil prices are down 41.3% from a year earlier. The rout on oil prices isn’t abating. Oil prices touched below $30 a barrel this week for the first time since 2003.
But even outside of petroleum, import prices were down 0.4% in December, and have fallen 3.7% from a year earlier. That was the largest 12-month decline for the category since October 2009.
A stronger dollar has been exerting downward pressure on the price of imported goods in recent months. As the dollar gains strength against the euro and other currencies, it makes foreign products relatively cheaper for U.S. consumers.
The consumer-price index rose 0.5% in November from a year earlier, which is up from earlier in 2015 but still a historically weak pace. The December figure will be released next week.
In December, import prices fell in most categories, including a 1.4% drop in industrial materials excluding petroleum, a 0.3% fall in capital goods such as machinery, and a 0.1% decline in car and automotive part prices. The cost of nonagricultural foods, such as fish and distilled beverages, increased 0.5% last month, but overall food prices still fell.
The price of goods imported from China fell 1.7% in December from a year earlier, the largest 12-month decline in six years. Prices from Canada, the largest U.S. trading partner, were down 14.8% from a year earlier. The price of imports from the European Union fell 3.9%.
U.S. export prices also declined last month, possibly reflecting lackluster demand overseas. Export costs fell 1.1% in December from the prior month. Export prices are down 6.5% year-over-year. Unlike many other price gauges measured by the government, import and export prices aren’t seasonally adjusted.
