US import prices post the biggest drop in 6 months

U.S. import prices fell by the most in six months in June, pulled down by declines in the costs of petroleum and other goods, suggesting imported inflation remained subdued.

The Labor Department said on Tuesday import prices dropped 0.9% last month, the biggest decrease since December. Data for May was revised up to show import prices unchanged instead of decreasing 0.3% as previously reported.

Economists polled by Reuters had forecast import prices falling 0.7% in June. In the 12 months through June, import prices fell 2.0% after declining 1.1% in May.

Data last week showed an acceleration in underlying consumer prices in June. Producer prices, however, rose marginally. The mixed inflation readings have little impact on market expectations that the Federal Reserve will cut interest rates this month for the first time in a decade.

But the signs of a pickup in consumer prices after months of little growth further reduced the odds of a 50 basis points cut at the U.S. central bank’s July 30-31 policy meeting.

Fed Chairman Jerome Powell last week told lawmakers the central bank would “act as appropriate” to protect the economy against risks stoked by a trade war between the United States and China, as well as slowing global growth.

Import prices exclude tariffs. In June, prices for imported fuels and lubricants fell 6.5% after rising 2.3% in the prior month. Imported food prices tumbled 1.5%, the second straight monthly drop.

Excluding fuels and food, import prices fell 0.2% in June after a similar decline in May. The so-called core import prices fell 1.6% in the 12 months through June. Though the dollar has weakened a bit this year, its gains last year against the currencies of the United States’ main trading partners continue to weigh on core import prices.

The cost of imported capital goods fell 0.2% last month. Prices for imported consumer goods excluding automobiles dipped 0.1%. The cost of goods imported from China slipped 0.1% last month, matching May’s drop. Prices fell 1.5% in the 12 months through June, the largest decline since February 2017.

The report also showed export prices fell 0.7% in June after dropping 0.2% in May. Export prices declined 1.6% on a year-on-year basis in June after decreasing 0.8% in May.