WASHINGTON, United States — U.S. import prices fell for a fifth straight month in November, pulled down by declining costs for petroleum products and a strong dollar — supporting the view that inflation could continue to moderate in the months ahead — a report from the Labor Department released on Wednesday, Dec. 14 showed.
The report followed on the heels of news that consumer prices increased less than expected for the second consecutive month in November on Dec. 13.
Subsiding inflation allowed the Federal Reserve to raise its policy rate by half a percentage point on Wednesday, breaking a string of four straight 75-basis-point increases, and bringing an optimistic outlook for Q4 numbers.
The U.S. central bank, however, projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, noting that “inflation remains elevated.”
“Fed Chair (Jerome) Powell can chalk up another win in his epic inflation fight,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “The Fed’s aggressive front-loaded rate hikes sent the dollar soaring and the payoff is that imported goods prices are coming down.”
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Import prices dropped 0.6 percent last month after declining 0.4 percent in October. Prices have now decreased for five months in a row, the longest such stretch since 2015.
Economists polled by Reuters had forecast import prices, which exclude tariffs, would fall 0.5 percent.
In the 12 months through November, import prices increased 2.7 percent, the smallest gain since January 2021, after rising 4.1 percent in October. Imported fuel prices fell 2.8 percent last month after dropping 2.7 percent in October. Petroleum prices decreased 3.3 percent, while the cost of imported food rebounded by 1.8 percent.
Excluding fuel and food, import prices fell 0.6 percent. These so-called core import prices dipped just 0.1 percent in October. Core import prices are being depressed by the dollar’s strength against the currencies of the United States’ main trade partners. The dollar has gained about 6.2 percent on a trade-weighted basis this year.
Imported capital goods prices ticked up 0.1 percent, while prices for automotive vehicles, parts and engines were unchanged. Imported consumer goods, excluding automotive parts, fell 0.2 percent and were down for a third straight month.
READ MORE: U.S. Inflation Subsides Further in November
The Fed’s policy rate, which began the year at the near-zero level, is now in a target range of 4.25 percent to 4.50 percent — the highest since late 2007. It projected this rate rising to 5.1 percent in 2023.
Inflation pipeline clearing
The government reported on Tuesday that consumer prices increased moderately in November. The Fed’s aggressive monetary policy stance is dampening demand in the economy.
“The inflation pipeline is clearing. Consumer prices should continue to ease throughout 2023, alleviating inflation pressure, particularly on lower-income households,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. “The Fed will likely further downshift the pace of rate hikes in 2023 and eventually pause by mid-year.”
The report from the Labor Department also showed export prices fell 0.3 PERCENT in November after declining 0.4 percent in October. Export prices have also dropped for five straight months. They increased 6.3 percent on a year-on-year basis in November, the smallest rise since February 2021, after advancing 7.4 percent in October.
Prices for agricultural exports rebounded 2.3 percent — lifted by higher prices for soybeans, vegetables, fruit and corn, which offset lower prices for cotton, meat and wheat. They had previously dropped 0.8 percent in October.
Meanwhile, Non-agricultural export prices decreased 0.6 percent after sliding 0.3 percent in October. There were decreases in prices for industrial supplies and materials, capital goods, and consumer goods.
Reuters contributed to this report.