U.S. import prices fall sequentially in January

Import prices in the U.S. dropped in the month of January, coming in below consensus expectations. Sequentially, import prices fell 0.5 percent, as compared with consensus expectations of a fall of 0.2 percent. Stripping volatile components such as food and fuels, import prices dropped 0.2 percent and imply widespread softness in imported inflation. The annual trend in headline import prices has decelerated sharply in recent months, to -1.7 percent in January mainly driven by the fall in energy prices. However, the core measures that excludes food and fuel has also decelerated to 0.0 percent year-on-year. For instance, components such as consumer goods and autos and parts recorded falls in price in January.

In terms of trading partners, import price pressures from China continued to be soft at -0.2 percent sequentially and -0.6 percent year-on-year. 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, noted Barclays in a research report.

Moreover, the recent easing of Chinese PPI inflation implies some weakness in pipeline price pressures in China might be spilling over to U.S. imported inflation. In January, there are continued falls in import prices from the U.S.’s two other main trading partners, China and Mexico. Their softness can be linked greatly to the recent fall in energy prices, stated Barclays.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -18.9333 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex