By Paul Kiernan
WASHINGTON -- Prices of foreign-made goods imported to the U.S. rose in April at their slowest pace in three months, a sign that a strong dollar may be contributing to low U.S. inflation.
Import prices rose 0.2% in April from the previous month, the Labor Department said Tuesday. Economists surveyed by The Wall Street Journal had expected a 0.6% advance.
The import-price index isn't adjusted for seasonality, making it more volatile on a month-to-month basis than other data. It also doesn't include services such as housing and healthcare, which account for the bulk of Americans' spending. Still, Tuesday's data were the third set of soft inflation numbers to come out in recent days, reinforcing the Federal Reserve's decision to stop raising short-term interest rates because inflation is muted.
The Labor Department said last week its closely watched consumer-price index rose 0.3% from March, while the producer-price index climbed 0.2%. Both increases were 0.1 percentage point below economists' expectations.
"It's just another argument for contained core inflation," said Joshua Shapiro, chief U.S. economist at MFR, Inc.
Import prices were restrained last month by a 0.6% decline in prices non-petroleum goods compared with March. Within this category of goods, the most striking components were capital goods and "non-petroleum industrial supplies and materials," both of which saw the biggest monthly price declines since 2009. Consumer-goods prices fell 0.3% in April from March, while prices for autos and parts slipped 0.1%.
Economists said a strengthening dollar likely pushed down import prices last month after they spiked in February and March. The stronger currency means products purchased from other countries cost less.
The WSJ Dollar Index, which tracks the greenback against a basket of foreign currencies, has appreciated 2.3% since late January and is up 4.4% from a year earlier. The import price index was down 0.2% from a year earlier.
Currency changes typically affect the data with a lag, since products from overseas often spend several weeks in transit before passing through U.S. customs, where their prices are measured by the Labor Department.
Import prices don't include any taxes, though tariffs imposed over the past year by the Trump administration could still affect the data in several ways. Higher duties could encourage U.S. firms to buy goods from countries that are more expensive than China, pushing import prices up. On the other hand, U.S. importers or Chinese suppliers may decide to absorb some of the cost of the tariffs, in which case import prices would fall.
Because prices are measured almost entirely in dollars, they also would fall if the trade dispute led to a weakening of the target country's currency. That has appeared to happen in the case of China, the focal point of President Trump's tariffs: The yuan weakened about 6% against the dollar between April 2018 and April 2019, while the price of imported goods from China last month was down 1.1% from a year earlier.