US Import Prices Decline for First Time in 7 Months

US Import Prices Decline for First Time in 7 Months
Cargo shipping containers are seen at a storage yard in Carson, Calif., on March 11, 2022. Picture taken with a drone. (Bing Guan/Reuters)

U.S. import prices posted their first decline in seven months in July, helped by a strong U.S. dollar and on lower costs for both fuel and nonfuel products in another sign that inflation may have peaked.

Import prices fell by a more-than-expected 1.4 percent last month after rising 0.3 percent in June, the Labor Department said on Friday. It was the largest monthly drop since April 2020. In the 12 months through July, import prices increased 8.8 percent after rising 10.7 percent in June, the fourth straight month the annual rate has fallen.

Economists polled by Reuters had forecast import prices, which exclude tariffs, would decline 1.0 percent from June.

The report follows other tentative indications earlier this week that inflation has peaked, with U.S. consumer prices unchanged in July due to a sharp drop in the cost of gasoline, after advancing 1.3 percent in June, although underlying price pressures remained elevated. Producer prices also declined last month on the back of lower energy costs.

"Declining import prices and producer prices support the ... thesis that the economy is past headline peak inflation," said Jeffrey Roach, chief economist at LPL Financial.

The Federal Reserve is mulling whether to raise its benchmark overnight lending rate by another 50 or 75 basis points at its next policy meeting on Sept. 20–21, as the U.S. central bank battles to cool demand across the economy and bring inflation back down to its 2 percent goal. The Fed has raised its policy rate by 225 basis points since March.

Imported fuel prices dropped 7.5 percent last month after surging 6.2 percent in June. Petroleum prices declined 6.8 percent, while the cost of imported food fell 0.9 percent, the largest one-month drop since November 2020 and third straight month of abatement.

Excluding fuel and food, import prices dropped 0.5 percent. These so-called core import prices decreased 0.6 percent in June. They rose 3.8 percent on a year-on-year basis in July. The strength of the U.S. dollar is helping keep a lid on core import prices.

The dollar has gained around 10 percent against the currencies of the United States' main trade partners since the beginning of the year.

The report also showed export prices fell 3.3 percent in July after accelerating 0.7 percent in June. Prices for agricultural exports declined 3.0 percent, with the fall led by lower prices for soybeans, wheat, and cotton.

Nonagricultural export prices fell 3.3 percent. Export prices rose 13.1 percent on a year-on-year basis in July after increasing 18.1 percent in June.