US April import prices rise on increase in petroleum products cost

United States import prices rose for the second straight month since mid-2015, albeit below expectations, on accelerating petroleum products cost. This is indeed an indication that inflation is likely to strengthen in the coming months.

Import prices increased 0.3 pct last month after an upwardly revised 0.3 percent gain in March. The rise last month was due to a pick-up in oil prices amid a depreciating dollar. Besides, rise in non-fuel imports by 0.1 pct in April with firm gains in food, beverages and industrial supplies also contributed to the rise in import prices, the US Labor Department report showed.

Further, monthly import prices gains from Canada, Mexico and the European Union was led by higher fuel and metal prices. However, prices of imports from China slipped 0.1 pct in the previous month.  A Reuters poll of economists forecasted that import prices would rise 0.5 pct in April after March's previously reported 0.2 pct advance.

Prices of imported goods deteriorated 5.7 pct in the 12 months ending Apr, 2016, reflecting the greenback’s sharp rally and the plunge in oil prices between June 2014 and December 2015. However, the disinflationary impacts of a strong dollar, which helped hold inflation below the 2 pct target of the Federal Reserve, have started to fade away.

In addition, imported petroleum prices rose 4.1 pct last month after rising 9.6 pct in March. Import prices excluding petroleum edged 0.1 pct higher, the first increase since March 2014. Imported food prices surged 1.3 pct last month, also the largest gain since March 2014. Prices for imported industrial supplies and materials excluding petroleum increased 0.4 percent.

However, prices of imported capital goods slipped 0.1 pct, while the cost of imported automobiles edged up 0.1 pct. Prices for imported consumer goods excluding auto slipped 0.3 percent.

"Looking ahead, we expect import price inflation to climb higher in the coming months on anticipation of further oil price stabilization and more gradual appreciation of the greenback," Wells Fargo Securities said in a research note.