(Photo: REUTERS)
The Labor Department said Friday that U.S. import prices hit a 6-year low at 2.8 percent in January, with across-the-board decreases not seen since 2008. The report is the latest sign that domestic inflation pressures are not strong enough to hit the Federal Reserve’s target, which they repeatedly cite as a prerequisite for raising interest rates in mid-2015.
The Labor Department also revised December’s number down to 1.9 percent from a previously reported 2.5 percent drop, which marks the seventh straight month of declines in import prices. Economists polled by Reuters had forecast import prices would fall by 3.2 percent last month.
In the 12 months through January, import prices have declined 8.0 percent, also the largest drop since September 2009.
Crude oil prices have tanked nearly 60 percent since June, fueled by increased shale production in the U.S. and weak global demand. However, with rigs closing at a rate of 60-70 per week, the trend is expected to reverse and gas prices are already beginning to climb.
The dollar has strengthened significantly relative to the currencies of the country’s main trading partners, which is another factor keeping the Federal Reserve from hitting its 2 percent target. But it also undercuts U.S. competitiveness in the current global environment.
Last month, imported petroleum prices plummeted 17.7 percent, also the biggest fall since December 2008 after falling 12.4 percent in December. Imported food prices fell 2.2 percent in January, or the largest fall since February 2012.
The declines were broad, as the prices of imported capital goods, automobiles and consumer goods (excluding automobiles) all fell.
Import prices excluding petroleum fell 0.7 percent last month after staying flat in December, the biggest drop since March 2009. Export prices also fell by 2.0 percent in January, the largest decline since October 2011, after falling 1.0 percent in December.
