U.S. import prices slid in August, offering some inflation relief

U.S. import prices fell for a second straight month in August, offering one source of relief from inflationary pressures, with a strengthening dollar helping to cut the cost of products made abroad.

Prices of imported goods dropped 1% in August from July, marking the first consecutive monthly retreat since the pandemic began in spring 2020. Excluding petroleum, prices dipped 0.2% from July, a Labor Department report showed in Washington on Thursday.

August saw the fourth straight monthly drop in core import prices, a turnabout that in part reflects U.S. currency appreciation. The Bloomberg Dollar Spot Index has soared 11% so far this year and reached a record high in early September - an advance that makes goods priced in foreign currencies less costly.

“Lower August prices for foods, feeds, and beverages; nonfuel industrial supplies and materials; and automotive vehicles more than offset higher consumer goods prices,” the Labor Department said in its report.

Federal Reserve Chair Jerome Powell has noted that a strengthening dollar is one channel through which monetary policy works. Investors have flocked to the greenback as they marked up expectations for interest rates in the U.S. relative to other countries.

The dollar’s gains have proved a help amid goods-price inflation that’s remained stubbornly high, with continuing disruptions to global supply chains and strong U.S. consumer demand.

By contrast, the cheapening in the euro, yen and other currencies against the dollar have added to inflationary pressures abroad.

“Because the Fed is out in front of most advanced-economy central banks, we’re exporting inflation, essentially, through the strong dollar,” Christopher Low, the chief economist at FHN Financial in New York, said before the report. “Import prices are actually falling because the dollar is so much stronger.”