WASHINGTON—U.S. import prices dropped for a seventh straight month in January amid declining costs for energy products, leading to the smallest annual increase in imported inflation in two years.
The report from the Labor Department on Friday, however, did little to assuage financial market fears the Federal Reserve could maintain its interest hiking campaign through the summer after data this week showed a jump in monthly consumer and producer prices in January, suggesting a slow disinflation journey.
Import prices fell 0.2 percent last month after slipping 0.1 percent in December. The drop in import prices, which exclude tariffs, was in line with economists’ expectations.
In the 12 months through January, import prices increased 0.8 percent. That was the smallest year-on-year gain since December 2020 and followed a 3.0 percent rise in December.
Imported fuel prices dropped 4.9 percent after declining 4.4 percent in December. Petroleum prices fell 4.5 percent, while natural gas tumbled 11.2 percent. The cost of imported food surged 1.3 percent.
Excluding fuel and food, import prices gained 0.2 percent. These so-called core import prices rose 0.4 percent in December. Core import prices have now increased for two straight months, likely reflecting the dollar’s recent weakness against the currencies of the United States’ main trade partners.
Recession Risks Remain
Data this month have suggested strength in the economy at the start of the year, with robust job growth and retail sales gains. But the economy remains in danger of falling into recession this year.A report from the Conference Board on Friday showed its leading economic index, a gauge of future economic activity, dropped 0.3 percent in January after falling 0.8 percent in December. The leading indicator has declined 3.6 percent over the last six months.
Still, the persistent strength in the labor market and high inflation prompted some economists, including those at Bank of America Securities, to forecast a rate hike in June.
“March and May hikes appear very likely, and the Fed might have to hike further if inflation, job growth and consumer demand refuse to soften,” Bank of America Securities said in a note. “We are adding a 25 basis point hike in June to our forecast.”
Prices of imported capital goods increased in January and there was 0.6 percent jump in the cost of motor vehicles. Consumer goods prices, excluding automotives, gained 0.2 percent.
The cost of imported goods from China fell 0.4 percent, the largest monthly drop since November 2016. That reflected a 2.3 percent decline in the price of communications equipment manufacturing. Prices for imports from the European Union surged 1.3 percent, while the cost of goods from Mexico rose 0.8 percent.
“These data provide no encouragement for those looking for manufactured goods price increases to subside to pre-pandemic trends on an easing of supply-chain constraints,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The Labor Department also reported that export prices rebounded 0.8 percent in January, after declining for six straight months. Prices for agricultural exports fell 0.2 percent as a 21.6 percentplunge in vegetable prices more than offset higher prices for soybeans and corn.
Nonagricultural export prices increased 0.8 percent, lifted by industrial supplies and materials, capital goods, automotive vehicles and consumer goods.
Export prices rose 2.3 percent year-on-year, the smallest gain since December 2020, after increasing 4.3 percent in December.
