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U.S. import prices fall sequentially in June

Import prices in the U.S. dropped in June. On a sequential basis, import prices dropped 0.4 percent, as compared with consensus expectations of a rise of 0.1 percent. Non-petroleum import prices dropped 0.3 percent sequentially, as compared with consensus expectations of 0.2 percent rise. The data came after a solid rise in May, and total imported inflation is running at a strong 4.3 percent year-on-year. But this appears to be driven mainly by the petroleum component, as imported inflation ex-petroleum was considerably softer at 1.4 percent year-on-year.

Delving into details, there is a widespread fall in prices in June, with particular softness in foods and beverages, which dropped 2.6 percent sequentially. Petroleum prices fell 0.8 percent and consumer goods prices dropped 0.3 percent. The longer-term trend is slightly different, as the recent decline in petroleum prices is a blip compared with the 37.8 percent year-on-year rise through June, which reflects the stable rise in oil prices since mid-2016. However, the trend in foods and consumer goods has been soft for some time. Thus, the message from import prices is viewed as one of divergence between energy and consumer import prices that is expected to play out for the remainder of the year, stated Barclays in a research report.

Import prices from China were flat sequentially and rose quite modestly by 0.5 percent year-on-year in June. This compares with a fall of 0.3 percent sequentially and a rise of 10.7 percent year-on-year for Canadian import prices.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 25.9925. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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