WASHINGTON, June 14, 2024 (Financeflashnews) – U.S. import prices unexpectedly fell in May amid lower prices for energy products, providing another boost to the domestic inflation outlook.
Here are some key points from the report:
- Import prices dropped 0.4% last month after an unrevised 0.9% surge in April.
- Economists had expected import prices to edge up 0.1%.
- The decline in import prices was partly reflected in a sharp pullback by prices for fuel imports, which tumbled by 2.0% in May after surging by 4.1% in April.
- Nonfuel import prices weakened 0.3% after a 0.7% April increase.
- Import prices for foods, feeds & beverages declined 1.6% after four consecutive monthly increases.
- Motor vehicle & parts prices eased 0.1% after a 0.4% rise.
- Capital goods prices slipped 0.1% after a 0.1% improvement while nonauto consumer goods prices eased 0.2%, off for the third straight month.
The unexpected pullback in import prices comes as the Federal Reserve prepares to kick off its monetary policy tightening cycle this month. The central bank is expected to raise interest rates by 25 basis points at its June 19-20 meeting, with some economists predicting a more aggressive 50-basis-point hike.
The data could have implications for inflation expectations, as import prices feed into domestic consumer prices. However, the overall trend of rising import prices is still likely to keep upward pressure on inflation, especially if energy costs remain elevated.
In addition to the report on import and export prices, the BLS will also release data on consumer prices next week. The consumer price index (CPI) is expected to show a modest increase in May, but still remain near a 40-year high.
The Federal Reserve will be closely watching the inflation data as it makes decisions about the pace of future interest rate hikes. The central bank is aiming to bring inflation down to its 2% target without triggering a recession.
The unexpected decline in import prices is a welcome sign, but it is too early to say whether it will be enough to change the Fed’s outlook. The central bank is likely to remain cautious and data-dependent as it moves forward with its monetary policy tightening cycle.
