U.S. import prices recorded their biggest drop in seven months in March as the cost of petroleum declined, but the underlying trend pointed to a moderate rise in imported inflation as the dollar's rally fades.
The Labor Department said on Wednesday import prices fell 0.2 % last month, the largest drop since August, after a 0.4 % increase in February.
That lowered the year-on-year increase in import prices to 4.2 % from 4.8 % in February.
Economists polled by Reuters had forecast import prices slipping 0.2 % last month. U.S. financial markets were little moved by the report.
The drop in import prices is unlikely to be sustained with oil prices pushing higher in recent days amid rising geopolitical tensions following last week's U.S. missile strike on Syria and reports that Saudi Arabia wants to extend production cuts enacted in January for another six months.
Despite weak imported price pressures, domestic inflation is rising. Most consumer inflation measures have pushed above the Federal Reserve's 2 % target. A report on Thursday is expected to show producer prices unchanged in March, but rising 2.4 % on a year-on-year basis, according to a Reuters survey of economists.
Prices for imported petroleum fell 3.6 % last month, the biggest drop since August, after increasing 1.3 % in February. Import prices excluding petroleum increased 0.2 % after rising 0.3 % the prior month.
Import prices excluding petroleum have now increased for three straight months, in part reflecting an ebb in the dollar's rally. Prices for imported capital goods edged up 0.1 % in March after rising 0.2 % in February.
Imported consumer goods prices excluding automobiles fell 0.2 % last month after gaining 0.3 % in February. The cost of imported food fell 0.7 % last month after increasing 1.0 % in February.
The report also showed export prices rose 0.2 %
in March after advancing 0.3 % the prior month. That lifted the year-on-year increase to 3.6 %, the biggest rise since December 2011, from a 3.2 % gain in February.
Prices for agricultural exports increased 0.9 % last
month, led by gains in meat and nut prices. Agricultural prices rose 5.3 % in the 12 months to March, the largest increase since June 2013.
Higher soybean prices accounted for the bulk of the year-on-year increase in agricultural export prices in March.