US im­port prices fall, but down­ward trend near­ing end

The Pak Banker - - MARKETS/SPORTS -

US im­port prices fell in Fe­bru­ary for an eighth straight month, weighed down by de­clin­ing costs for pe­tro­leum and a range of other goods, but the pace of de­cline is slow­ing as the dol­lar's rally fades and oil prices sta­bi­lize.

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 20months, 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 pres- sures 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 tradeweighted 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.

US 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.

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