U.S. import prices post biggest drop in six months

(C) Reuters. An aerial photo looking north shows shipping containers at the Port of Seattle and the Elliott Bay waterfront in Seattle

WASHINGTON (Reuters) – U.S. import prices fell by the most in six months in February as the cost of petroleum products dropped, and economists said they could decline further because of the coronavirus pandemic and an oil price war between Saudi Arabia and Russia.

The Labor Department said on Friday import prices slipped 0.5% last month after an upwardly revised 0.1% gain in January. Import prices, which exclude tariffs, were previously reported to have been unchanged in January.

Economists polled by Reuters had forecast import prices would decrease 0.8% in February. In the 12 months through February, import prices declined 1.2% after rising 0.3% in January.

The import price deflation and the coronavirus are expected to subdue inflation in the months ahead. The virus has disrupted supply chains as China, the main source of inputs used in many factories in the United States, struggles to bring manufacturing production back to full capacity.

While the resulting shortages are likely to push up prices of some goods, travel restrictions and social distancing are seen depressing demand for services such as travel, hotels, entertainment and eating out at restaurants. The coronavirus’s impact is expected to start showing up in March economic data.

In February, prices for imported fuels and lubricants tumbled 7.7% after falling 0.6% in January. Petroleum prices dropped 7.6% after being unchanged in January.

Imported food prices surged 1.5% last month. That followed a 0.4% increase in January. Excluding fuels and food, import rose 0.2% last month. The so-called core import prices edged up 0.1% in January. Core import prices fell 0.8% in the 12 months through February.

The cost of goods imported from China declined 0.2% in February, the most since January 2019, after being unchanged in the prior month. Prices fell 1.5% year-on-year in February.

The report also showed export prices dropped 1.1% in February, the largest decline since December 2015, after increasing 0.6% in January. Export prices decreased 1.3% on a year-on-year basis in February after rising 0.4% in January.