Import Prices in U.S. Rise Less Than Forecast, Food Costs Drop

Prices of goods imported into the U.S. rose less than forecast in February, reflecting the biggest drop in food costs in three years.

The 0.4 percent gain in the import-price index follows little change in January, Labor Department figures showed today in Washington. Economists projected the gauge would increase 0.6 percent, according to the median forecast in a Bloomberg News survey. Prices excluding fuel fell 0.1 percent.

A slowing global economy may restrain demand for commodities, limiting inflation pressures in the U.S. even as energy costs rise. Federal Reserve policy makers yesterday projected they’ll keep interest rates low at least until late 2014, predicting the jump in fuel prices will be temporary.

“Once you look past the rise in oil, import prices are pretty tame on the back of the dollar strength we’ve been seeing recently,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “This points toward pretty well controlled non-energy costs.”

Projections for import prices ranged from increases of 0.2 percent to 1.7 percent, according to the Bloomberg survey of 52 economists.

Compared with a year earlier, import prices rose 5.5 percent, the smallest 12-month gain since December 2010, today’s report showed.

The cost of imported petroleum products climbed 1.8 percent from the prior month and was up 18 percent from a year earlier. The price of imported natural gas decreased 10 percent, the most since March 2011.

Food Costs Fall

Imported food was 3 percent less expensive last month, the biggest drop since February 2009.

“We feel like inflation will moderate,” Charles Holley, chief financial officer at Wal-Mart Stores Inc. (WMT), said during a March 7 investor conference. “The one wildcard, though, is going to be gas prices. If oil continues to go up, I think that could be a drag on economies around the world.”

Regular fuel in February averaged $3.56 a gallon, or 18 cents more than January, according to AAA, the nation’s biggest auto organization. It advanced further this month, reaching $3.81 on March 13, the highest since May.

“Inflation has been subdued in recent months although prices of crude oil and gasoline have increased lately,” the Federal Open Market Committee said in a statement following a meeting yesterday. Oil will “push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate” of stable prices and maximum employment.

Fed Plan

The central bank didn’t change its statement that economic conditions probably warrant “exceptionally low” lending rates at least through late 2014. In December 2008, the Fed lowered its target overnight interest rate to a range of zero to 0.25 percent.

Other materials have since fallen in value after peaking in February. The ThomsonReuters/Jeffries CRB commodity index was 318.07 yesterday, down from a five-month high of 325.91 last month.

A U.S. dollar that has gained value after hitting an almost three-year low last April will probably make foreign goods cheaper in the U.S. Since April 28, the Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against that of six major trade partners including the euro and yen, has advanced 9.7 percent through yesterday.

Slowing Economies

Economic growth that is cooling in the euro area as countries like Spain and Italy work to reduce deficits will probably relieve pressure on commodity prices. Emerging markets like China and India have taken steps to slow growth.

The cost of imported goods from China increased 0.1 percent and were up 3.3 percent over the past 12 months.

Imported goods from Japan climbed 0.2 percent, while the cost of goods from the European Union dropped 0.1 percent. Goods from Mexico fell 0.6 percent.

U.S. export prices increased 0.4 percent in February, today’s report also showed, after rising 0.2 percent the previous month. Prices of farm exports dropped 0.9 percent and those of non-farm goods increased 0.5 percent.

The import-price index is the first of three monthly price gauges from the Labor Department. Data on producer prices come out March 15, followed the next day by the consumer-price index.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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