Washington, DC, United States (4E) – The Labor Department reported on Friday that U.S. import prices dropped by 0.6 per cent. The drop in the import-price index surprised several economists who projected a 0.2 per cent rise in July, according to a Bloomberg survey.
Over the past 12 months, import prices have fallen 3.2 per cent after inching up 13.7 per cent from July 2010 to July 2011, according to the Bureau of Labor Statistics (BLS). The drop during the July 2011 to July 2012 period is the largest year-to-year fall in import prices since the October 2008 to October 2009 12-month range where the index fell by 5.6 per cent.
Based on BLS data, the price index for import fuel in July is also down by 1.2 per cent in July, making its fourth straight month of decline.
July non-fuel prices are also down by 0.4 per cent, after a 0.3 per cent decline in the previous month. This is the largest monthly drop since June 2010 where non-fuel prices fell by 0.4 per cent. This was brought about by lower prices in non-fuel industrial goods, beverages, feeds, and foods.
The lower cost of food from abroad has offset price pressures in the U.S. as a result of the extended drought in the Midwest region. The drought has driven up price of corn and that may lead to expensive corn feed. Ranchers, as a result, sell more of their cattle to the market lowering beef prices.
U.S.-based companies and consumers can expect minimal cost pressures from abroad since there is softening demand for raw materials due to the slowing global economy. The U.S. dollar has recently held its own against major currencies, allowing American businesses to keep prices on hold and the Federal Reserve to keep interest rates steady at near zero.
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