Import prices fall for second straight month upon strengthening dollar

Import prices rose 0.2% in July, slightly lower than forecasts. Nonpetroleum import prices fell 0.2% in July and prices excluding fuels declined by 0.3%. Over the last year, nonpetroleum import prices have risen by 3.1% (unchanged from June), while nonfuel import prices have posted a 2.8% increase on the same basis (versus 2.9% in the prior month).

BOTTOM LINE

Underlying import prices have fallen for two straight months, perhaps reflecting the strengthening of the dollar earlier this year. We expect that the Fed’s expansion of quantitative easing will put downward pressure on the dollar and this, combined with rising foreign inflation pressures (from China and elsewhere) and a likely jump in food prices may begin to boost nonfuel import prices in the months ahead.

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