Price pressures in the United States may have peaked

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A person pumping gasoline at a Sunoco gas station after the rate of inflation hit a 40-year high in January, in Philadelphia, Pennsylvania, USA. (Photo Reuters)

U.S. import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and other costs, while the one-year inflation outlook for consumers declined in August, with the latest signs that price pressures may have peaked.

Import prices, excluding tariffs, fell 1.4% last month after rising 0.3% in June, the Labor Department said Friday.

It was the biggest monthly drop since April 2020 and topped the 1.0% decline economists expected in a Reuters poll. In the 12 months to July, import prices rose 8.8% after rising 10.7% in June, marking the fourth consecutive monthly decline in the annual rate.

The report followed other tentative indications earlier this week that inflation was finally easing. Consumer prices in the United States remained unchanged in July due to a sharp drop in the cost of gasoline, after rising 1.3% in June, although underlying price pressures are remained high. Producer prices also fell last month due to lower energy costs.

“The fall in import prices and producer prices supports the thesis that the economy is past peak inflation,” said Jeffrey Roach, chief economist at LPL Financial.

The Federal Reserve is considering whether to raise its benchmark overnight lending rate by 50 or 75 basis points at its next policy meeting on September 20-21, as the U.S. central bank battles to cool demand across the economy and bring inflation down to its target level of 2 per cent.

The Fed has raised its key rate by 225 basis points since March.

Richmond Fed President Thomas Barkin reiterated following Friday’s data that he and his fellow policymakers will not give up on raising rates until they see lasting evidence that pressures on prices are firmly on the downside.

“I’d like to see a period of sustained inflation under control, and until we do, I think we’ll just have to move rates into restrictive territory,” Barkin told CNBC.

Imported fuel prices fell 7.5% last month after jumping 6.2% in June.

Oil prices fell 6.8%, while the cost of imported food fell 0.9%, the biggest one-month drop since November 2020 and the third consecutive monthly decline.

Excluding fuel and foodstuffs, import prices fell by 0.5%. These so-called core import prices fell 0.6% in June. They rose 3.8% year-on-year in July. The strength of the US dollar is helping to contain the prices of basic imports.

The dollar has appreciated by about 10% against the currencies of the main trading partners of the United States since the beginning of the year.

The report also showed export prices fell 3.3% in July after accelerating 0.7% in June. Agricultural export prices fell 3.0%, led by lower prices for soybeans, wheat and cotton.

Non-agricultural export prices fell 3.3%. Export prices rose 13.1% year-on-year in July after rising 18.1% in June.

US consumer confidence improved further in August after hitting a record low at the start of the summer and the near-term outlook for US household inflation eased again due to the sharp drop in oil prices. gasoline, according to a survey by the University of Michigan.

August’s preliminary reading of the survey’s overall consumer sentiment index came in at 55.1, down from 51.5 the previous month. It had hit a record low of 50 in June.

August’s preliminary reading was above the median forecast of 52.5 among economists polled by Reuters.

The survey’s one-year inflation expectation fell to a six-month low of 5.0% from 5.2%, while the survey’s five-year inflation outlook rose slightly to 3.0% against 2.9%, remaining within the range that prevailed last year.

Consumer prices in the United States remained unchanged in July due to a sharp drop in the cost of gasoline, offering the first noticeable sign of relief for weary Americans who have watched inflation climb over the past two years.

The consumer price index (CPI) held steady last month after rising 1.3% in June, the Labor Department said Wednesday in a closely watched report that nonetheless showed inflationary pressures underpinned. underlyings remain high as the Federal Reserve considers whether to adopt another large interest. rate hike in September. – Reuters

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