U.S. Import Prices Show Modest Increase

By Lucia Mutikani
WASHINGTON (Reuters) – U.S. import prices had a slight rise in November, attributed to increased food and fuel costs being partly mitigated by a strong dollar, indicating potential easing of inflation pressures ahead.

The Labor Department’s report released on Friday highlighted a notable drop in imported air passenger fares last month, aligning with economists’ expectations for moderated growth in personal consumption expenditures (PCE) price measures monitored by the Federal Reserve, which aims for a 2% inflation target.

Michael Hanson, an economist at JPMorgan, stated, “Recent dollar strength should be a headwind for import price growth in upcoming months, but trade policy remains a wild card.”

Import prices increased by 0.1% last month after a revised 0.1% rise in October, according to the Bureau of Labor Statistics. Economists had anticipated a decline of 0.2%. The BLS noted that while paid tariffs are excluded from import prices, they can still influence pricing trends.

Expectations of increased tariffs may lead to stockpiling, resulting in temporary demand spikes that drive prices higher, regardless of the tariff amount itself. President-elect Donald Trump has vowed to impose higher tariffs on key trade partners including Canada, Mexico, and China.

In the 12 months ending in November, import prices rose by 1.3%, up from 0.6% in October, while air passenger fares saw a 4.8% decrease after a 3.9% increase in October. Although inflation improvements have stalled recently, no significant deterioration has been observed. The government reported a notable increase in consumer prices last month, while underlying price pressures remained robust over the past four months.

Despite the notable increase in producer prices, services inflation has slowed. Economists predict a 0.1% gain in the core PCE price index for November, consistent with expectations of a 2.8% yearly increase, matching October’s figures.

On Wall Street, stocks were generally lower. The dollar held steady against a basket of currencies, while U.S. Treasury yields rose. Financial markets have largely anticipated a quarter-percentage-point interest rate cut from the Fed next week, but incoming administration tariffs could limit future rate cuts.

Imported fuel prices saw a 1.0% rebound last month after a 0.8% decline in October, with petroleum prices rising moderately by 0.4%. Imported natural gas prices surged by 47.4%.

Food prices also increased by 1.3% after three months of declines, driven by a significant 13.1% rise in vegetable costs. This surge suggests that food prices could continue to rise in the coming months.

Excluding food and fuel, import prices remained unchanged after a 0.3% rise in October, constrained by the dollar’s performance against major trading currencies. The trade-weighted dollar rose 2.1% from October to November, driven by expectations of fewer rate cuts next year. Core import prices increased 2.0% on a yearly basis in November, with prices of imported capital goods and automotive parts decreasing by 0.1%.

Chinese import prices continued to decline, down 0.1% for the second consecutive month, and have not risen since October 2022. Canada’s import costs fell by 0.4%, while Mexican imports saw a 0.3% increase.

Michael Gapen, chief U.S. economist at Morgan Stanley, remarked, “November data on inflation should provide comfort that the disinflation process remains in place.” He added that any potential changes in trade policy could alter the pricing dynamics in tradables, but currently, goods prices are not fundamentally increasing.