The Economy

U.S. Import Prices Rise 0.1% in December

The increase — the smallest since July — "could temper expectations that inflation will pick up this year."
Matthew HellerJanuary 10, 2018

U.S. import prices don’t seem likely to give much of a boost to inflation in the near term after recording their smallest gain in five months.

The Labor Department said on Wednesday that the price of imported goods edged up only 0.1% in December after increasing 0.8% in November. It was the smallest increase since July.

In the 12 months through December, prices increased 3.0%, slowing from November’s 3.3% jump. The gain was the biggest in six years and well above last year’s 1.9% increase but still reflects a relatively low level of inflation.

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Last month’s slowdown in import price growth “came despite a weak dollar, which could temper expectations that inflation will pick up this year and keep the Federal Reserve on a path of gradual interest rate increases,” Reuters reported.

The dollar lost 7% of its value against the currencies of the United States’ main trading partners last year.

“Our expectation for the dollar to decline further, along with another year of decent global growth, should lead non-fuel import prices to press higher this year,” said Sarah House, an economist at Wells Fargo Securities. “That said, with goods accounting for only a quarter of core CPI, the lift to more closely watched measures of consumer price inflation should be modest.”

As MarketWatch reports, energy prices have a big impact on overall import inflation and largely accounted for the increase in 2017. But in December, prices for imported petroleum rose only 2.0% after surging 8.1% in November.

Import prices excluding petroleum fell 0.2%, reversing a 0.2% gain in November. Prices excluding petroleum rose 1.3% in the 12 months through December.

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has missed its 2% target since May 2012. “Fed officials are desperate for more inflation and will take it from any quarter,” said Chris Rupkey, chief economist at MUFG in New York. “Today’s import price data will worry the Fed doves even more about too-low inflation.”