Marginal rise in US import prices suggests inflation pressures may subside

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. import prices barely rose in November as increases in the costs of food and fuels were partially offset by decreases elsewhere thanks to a strong dollar, suggesting that inflation pressures could subside in the months ahead.

The report from the Labor Department on Friday, which also showed a sharp drop in imported air passenger fares last month, was supportive of economists' expectations for tamer gains in the personal consumption expenditures (PCE) price measures tracked by the Federal Reserve for its 2% inflation target.

"Recent dollar strength should be a headwind for import price growth in coming months, but trade policy remains a wild card," said Michael Hanson, an economist at JPMorgan.

Import prices edged up 0.1% last month after a downwardly revised 0.1% rise in October, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast import prices, which exclude tariffs, would decline 0.2% after a previously reported 0.3% gain in October.

The BLS has previously noted that while paid tariffs are not included in import prices, they could have an impact on price trends before they are imposed and once in place.

Tariffs are a tax that raises the cost for importers and creates shortages. Expectations of higher tariffs could lead to stockpiling of goods, a short-run demand increase that the BLS explained "would tend to push prices upward, even before the tariff takes effect, regardless of the tariff amount itself."

President-elect Donald Trump has promised higher tariffs on goods from Canada, Mexico and China, the main U.S. trade partners.

In the 12 months through November, import prices increased 1.3% after advancing 0.6% in October. Imported air passenger fares fell 4.8% on a monthly basis after rising 3.9% in October.

The improvement in inflation has stalled in recent months, but there has been no noticeable deterioration. The government reported on Wednesday that consumer prices increased by the most in seven months in November, while a measure of underlying price pressures continued to run firmer over the past four months.

Though producer prices notched their largest monthly gain in five months, services inflation slowed in November.

With the three inflation reports in hand, economists' estimates for the PCE price index for November, excluding the volatile food and energy components, converged around a 0.1% gain.

The so-called core PCE inflation, one of the measures monitored by the Fed for monetary policy, rose 0.3% for a second straight month in October. It was forecast to increase 2.8% on a year-on-year basis in November, matching October's advance.