US import prices post biggest drop in seven months

A cargo ship docked at the Port of Newark, New Jersey.
Sabrina Korber | CNBC

U.S. import prices in August recorded their biggest drop in seven months as the cost of petroleum and a range of goods fell, indicating that a strong dollar and soft global demand continued to put downward pressure on imported inflation.

The Labor Department said on Thursday import prices fell 1.8 percent last month, the largest decline since January, after an unrevised 0.9 percent drop in July. Import prices have now declined in 12 of the last 14 months.

Economists had forecast import prices falling 1.6 percent.

In the 12 months through August, prices declined 11.4 percent, the largest drop since September 2009.

Very low inflation, in the face of a tightening labor market and strengthening economic growth, poses a challenge for Federal Reserve officials as they contemplate raising interest rates for the first time in nearly a decade.

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The Fed's policy-setting committee will meet on Sept. 16-17. Economists are divided on whether the U.S. central bank will raise rates at that meeting in the wake of recent volatility in global financial markets, which was sparked by fears of slower growth in China and other major emerging markets.

Last month, imported petroleum prices tumbled 14.2 percent, the biggest drop since January, after falling 5.9 percent in July. Import prices excluding petroleum slipped 0.4 percent, reflecting the impact of the dollar's 17.5 percent rise against the currencies of the United States' main trading partners since June 2014.

In August, imported food prices rose 0.3 percent after being flat in July. Prices for imported capital goods fell 0.2 percent, as did prices for imported automobiles.

The report also showed export prices fell 1.4 percent, also the largest drop in seven months. Export prices slipped 0.4 percent in July. They were down 7.0 percent in the 12 months through August, the biggest drop since July 2009.