U.S. import prices fall sequentially in August on sharp decline in energy prices

Import prices in the U.S. dropped further in August. On a sequential basis, import prices fell 0.6 percent, as compared with consensus expectations of a fall of 0.4 percent. The drop was mainly driven by a sharp fall in energy prices.

On a year-on-year basis, headline import prices rose 3.7 percent, indicating a 33 percent year-on-year rise in the petroleum component.

Up to now, there has been little evidence that the tariffs imposed by the U.S. on Chinese goods in June are exerting upward pressure on domestic prices, as the price index for U.S. imports from China dropped 0.1 percent sequentially in August, after a similar move in July. Import prices from Canada dropped 1.5 percent sequentially and rose 8.8 percent year-on-year.

There is an ongoing divergence of energy and non-energy import prices that is expected to continue to play out in the annual pace of change for headline CPI for the remainder of the year, noted Barclays in a research report. Upward pressures from increasing oil prices continue to leave an imprint on the headline, although petroleum import prices dropped 3.9 percent sequentially in August ad imply that the boost from energy prices is coming to an end, stated Barclays.

Price changes in the non-petroleum category came in mixed. The fall in non-petroleum import prices was seen mainly in industrial supplies and capital goods that recorded a fall of 2.2 percent and 0.1 percent, respectively.

Prices of food and drinks recovered in August after some solid falls in the previous two months and autos and consumer goods came in flat. The index for industrial supplies rose 16.1 percent year-on-year, perhaps reflecting large rises in the immediate aftermath of the tariffs imposed on steel and aluminium imports in March.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -32.4187. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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