US import prices barely rise in September due to strong dollar

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. import prices increased less than expected in September as a strong dollar depressed prices of non-energy products, which over time will help to lower domestic inflation.

Import prices edged up 0.1% last month, the Labor Department said on Friday. Data for August was revised higher to show prices climbing 0.6% instead of the previously reported 0.5%.

Economists polled by Reuters had forecast import prices, which exclude tariffs, would gain 0.5%.

"The stronger U.S. dollar on the back of higher bond yields may be in danger of pricing American exports out of world markets, but it is doing one good thing, which is tamping down the prices of imported goods coming into the country and aiding the Fed's inflation fight," said Christopher Rupkey, chief economist at FWDBONDS in New York.

Prices for imported fuel rose 4.4%, with petroleum increasing 4.9%. Natural gas prices fell 7.8%. Fuel prices advanced 8.8% in August. Imported food prices dropped 1.3%. Excluding petroleum, import prices decreased 0.3%.

In the 12 months through September, import prices dropped 1.7% after falling 2.9% in August. Annual import prices have now declined for eight straight months.

While data this week showed producer and consumer prices rising more than expected in September, underlying inflation remained moderate. That trend, together with a rise in U.S. Treasury yields and conflict in the Middle East, is expected to discourage the Federal Reserve from raising interest rates next month.

Excluding fuels and food, import prices slipped 0.1% after dropping 0.3% in August. These so-called core import prices decreased 1.1% on a year-on-year basis in September.

The dollar's strength against the currencies of the United States' main trading partners is dampening imported prices. The dollar has gained about 1.95% on a trade-weighted basis so far this year.

The cost of imported capital goods fell 0.1% for a second straight month in September. Prices for imported motor vehicles, parts and engines also dipped 0.1%, while those of consumer goods excluding automotives were unchanged.

"Declining import prices for consumer goods and auto parts should minimize the risk of a resurgence in consumer inflation," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

The cost of goods imported from China dropped 0.3% after being unchanged in the previous month. They fell 2.6% on a year-on-year basis in September, the largest decline since October 2009. Prices of goods imported from Canada increased 0.8%, but declined 6.7% on a year-on-year basis. Mexican goods import prices rose 3.7%.

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The report also showed export prices rose 0.7% last month after advancing 1.1% in August. They were lifted by higher prices for nonagricultural exports, which rose 1.0% amid increases in the prices of industrial supplies and materials, motor vehicles and capital goods. Agricultural export prices fell 1.1%, pulled down by soybeans, corn, wheat and meat.

Export prices decreased 4.1% on a year-on-year basis in September after dropping 5.7% in August. They have now declined for eight consecutive months.