Weak U.S. import prices support tame inflation picture

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. import prices fell for a third straight month in January, leading to the largest annual drop in nearly 2-1/2 years, the latest indication of tame inflation pressures.

The Labor Department said on Friday import prices decreased 0.5 percent last month as the cost of petroleum products fell and a strong dollar weighed on prices of motor vehicles and consumer goods. Import prices dropped by an unrevised 1.0 percent in December.

Import prices dropped 3.1 percent over the last three months, the biggest three-month decrease since July-October 2015. Economists polled by Reuters had forecast import prices dipping 0.1 percent in January.

In the 12 months through January, import prices tumbled 1.7 percent. That was the biggest annual decline since August 2016 and followed a 0.5 percent decline in December.

Data this week showed consumer prices unchanged in January for a third straight month and producer prices falling for a second consecutive month.

The inflation reports support the Federal Reserve's recent description of price pressures as being "muted."

The U.S. central bank kept interest rates unchanged last month and pledged to be "patient" before tightening monetary policy further.

Last month, prices for imported fuels and lubricants fell 3.2 percent after plunging 8.6 percent in December. Prices for imported petroleum dipped 0.1 percent after tumbling 10.7 percent in December.

Imported food prices fell 0.3 percent in January after edging up 0.1 percent in the prior month. Excluding fuels and food, import prices fell 0.2 percent last month after being unchanged in December. The so-called core import prices were flat in the 12 months through January.

Core import price readings are likely being held down by the strong dollar, which gained about 7.5 percent last year against the currencies of the United States' main trade partners.

The cost of goods imported from China fell 0.3 percent in January, the biggest drop since September 2017, after edging down 0.1 percent in each of the prior two months.

The report also showed export prices fell 0.6 percent in January, declining for a third straight month.

The Labor Department said a 35-day partial shutdown of the federal government had interrupted the collection of data by the Department of Agriculture, impacting the collection of export price data for the January release.

Export prices fell 0.2 percent on a year-on-year basis in January after rising 1.1 percent in December.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)