# U.S. inflation outlook brightens as import prices fall, consumer sentiment rises
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-12
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: U.S. Import Prices Fall in July, Signalling Peaked Inflation
Meta Description: Discover how the drop in import prices signals easing inflation pressures, supported by a strong dollar and lower fuel and nonfuel costs.
URL: https://financedigest.com/u-s-inflation-outlook-brightens-as-import-prices-fall-consumer-sentiment-riseshtml

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(Reuters) – U.S. import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and nonfuel costs, while consumers’ one-year inflation outlook ebbed in August, the latest signs that price pressures may have peaked.

Import prices, which exclude tariffs, fell 1.4% last [month after rising](https://www.financedigest.com/uk-new-car-sales-rise-17-in-march-best-ever-month-for-evs.html "UK new car sales rise 17% in March; best ever month for EVs") 0.3% in June, the Labor Department said on Friday.

That was the largest [monthly drop](https://www.financedigest.com/oil-ticks-up-as-u-s-inflation-cools-but-prices-set-for-monthly-drop.html "Oil ticks up as U.S. inflation cools, but prices set for monthly drop") since April 2020 and exceeded the 1.0% decline expected by economists in a Reuters poll. In the 12 months through July, import [prices gained](https://www.financedigest.com/oil-prices-stable-heading-for-weekly-gain.html "Oil prices stable, heading for weekly gain") 8.8% after a 10.7% rise in June, marking the annual rate’s fourth straight monthly decline.

The report followed other tentative indications earlier this week that [inflation was finally](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures") coming off the boil. U.S. consumer prices were unchanged in July due to a sharp drop in the cost of gasoline, after advancing 1.3% in June, although underlying [price pressures](https://www.financedigest.com/oil-prices-dip-on-u-s-crude-reserve-release-inflation-pressure.html "Oil prices dip on U.S. crude reserve release, inflation pressure") remained elevated. Producer prices also declined last month on the back of [lower energy costs](https://www.financedigest.com/bmw-bets-on-design-and-recycling-not-mining-to-lower-battery-costs.html "BMW bets on design and recycling, not mining, to lower battery costs").

Declining import [prices and producer prices support](https://www.financedigest.com/belgium-supports-energy-price-caps-suspending-trading-in-eu-power-crunch.html "Belgium supports energy price caps, suspending trading in EU power crunch") the … thesis that the economy is past [headline peak inflation,”](https://www.financedigest.com/boes-mann-falling-headline-inflation-high-core-make-policy-difficult.html "BoE’s Mann: Falling headline inflation, high core, make policy difficult") said Jeffrey Roach, chief economist at LPL Financial.

GRAPHIC: U.S. import and export [prices drop](https://www.financedigest.com/hong-kong-home-prices-drop-15-6-in-2022-snap-13-years-of-gain.html "Hong Kong home prices drop 15.6% in 2022, snap 13 years of gain") sharply (https://graphics.reuters.com/USA-ECONOMY/INFLATION/lbvgnajkgpq/chart.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/08/468.jpg)

The Federal Reserve is mulling whether to [raise its benchmark overnight lending rate](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked") by 50 or 75 basis points at its next policy meeting on Sept. 20-21, as the U.S. central bank battles to [cool demand across the economy](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") and bring inflation back down to its 2% goal. The [Fed has raised its policy rate](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") by 225 basis points since March.

Imported fuel [prices dropped 7.5% last month after surging](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") 6.2% in June. Petroleum prices declined 6.8%, while the [cost of imported food](https://www.financedigest.com/analysis-east-europeans-count-their-pennies-for-christmas-as-food-costs-soar.html "Analysis-East Europeans count their pennies for Christmas as food costs soar") fell 0.9%, the largest one-month drop since November 2020 and third straight monthly decline.

Excluding fuel and food, import [prices dropped](https://www.financedigest.com/oil-prices-head-for-fourth-weekly-drop-as-demand-fears-weigh.html "Oil prices head for fourth weekly drop as demand fears weigh") 0.5%. These so-called [core import prices](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") decreased 0.6% in June. They rose 3.8% on a year-on-year basis in July. The strength of the U.S. [dollar is helping keep](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control") a lid on core import prices.

The [dollar has gained](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") around 10% against the currencies of the United States’ main trade partners since the beginning of the year.

The [report also showed export prices](https://www.financedigest.com/ikea-reports-record-sales-as-price-hikes-offset-weakening-consumer-confidence.html "IKEA reports record sales as price hikes offset weakening consumer confidence") fell 3.3% in July after accelerating 0.7% in June. Prices for agricultural exports declined 3.0%, with the [fall led by lower prices](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") for soybeans, wheat and cotton.

Nonagricultural [export prices](https://www.financedigest.com/33391german-exporters-pinched-by-70-billion-euro-price-squeeze-dihk.html "German exporters pinched by 70-billion-euro price squeeze – DIHK") fell 3.3%. Export [prices rose 13.1% on a year-on-year basis in July after increasing](https://www.financedigest.com/syngenta-4q-profit-falls-as-raw-material-prices-increase.html "Syngenta 4Q profit falls as raw material prices increase") 18.1% in June.

GASOLINE PRICES

U.S. consumer sentiment ticked further up in August from a record low earlier this summer and American households’ near-term [inflation outlook](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") eased again on the back of the sharp drop in gasoline prices, a survey from the University of Michigan showed.

The [survey’s preliminary August reading on the overall index on consumer](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") sentiment came in at 55.1, up from 51.5 in the prior month. It had [hit a record](https://www.financedigest.com/u-s-oil-exports-to-europe-hit-record-in-march-on-steep-discounts.html "U.S. oil exports to Europe hit record in March on steep discounts") low of 50 in June.

The preliminary August reading was above the median forecast of 52.5 among economists [polled by Reuters](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll").

GRAPHIC: UMich (https://graphics.reuters.com/USA-STOCKS/byprjymgzpe/umich.png)

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/08/467.jpg)

The survey’s one-year [inflation expectation fell to a six-month low of 5.0% from 5.2%, while the survey’s five-year inflation outlook](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") edged up to 3.0% from 2.9%, holding within the range that has prevailed for the past year.

(Reporting by Lindsay Dunsmuir and Dan Burns; Editing by Paul Simao)


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