U.S. import prices fall sequentially in December on fall in energy prices

U.S. import prices soften in energy and core in December. Sequentially, the prices dropped 1 percent, as compared with consensus expectations of a fall of 1.3 percent. The fall was mainly due to fall in energy prices. The softness in the headline figure was mainly anticipated given the recent fall in energy prices. Stripping food and fuels import prices came in flat on a sequential basis.

On a year-on-year basis, import prices decelerated sharply to -0.6 percent from prior month’s rise of 0.7 percent. The core measure, which excludes food and fuel, decelerated modestly to 0.6 percent in December. The report is in line with an easing of imported inflation pressures because of the sharp deceleration in headline induced by the volatile energy component, but the trend in prices of imports excluding food and energy has also turned weaker.

Looking at trading partners, import price pressures from China continued to be weak. Anecdotal evidence implies that in response to tariffs from the U.S., Chinese companies might be lowering prices in order to stay competitive in the U.S. market. This would be in line with monthly import price patterns recently.

“In December, we continued to see declines in import prices from the US’s two other main trading partners, Canada (-1.5 percent) and Mexico (-0.5 percent) – we would attribute their weakness largely to the recent decline in energy prices”, said Barclays in a research report.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 19.6411 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex