Cost of Imports Falls 1.1%, First Drop in Over 2 Years

The price Americans pay for imported goods fell 1.1% from July through September, the first decline in more than two years, the government reported Thursday.

The Labor Department attributed the quarterly drop to a fall in crude oil prices and a rise in the value of the dollar against overseas currencies.

A stronger dollar boosts Americans’ purchasing power for foreign goods and also tends to make U.S. exports more expensive. U.S. export prices rose 2% during the July-September quarter, the department said.

The report said the dollar, after falling in value for three years, rose by 4.2% on a trade-weighted basis against other currencies during the third quarter. It had edged up by 0.3% in the second quarter.

Despite these increases, the dollar is still 28.8% lower than its high point reached in March, 1985, according to the currency index used by the Labor Department.

Deficit Rate Down

Many economists contend that further improvement in the U.S. merchandise trade deficit will require further declines in the dollar, with some suggesting that a drop of 20% may be needed.

The United States ran a record $170.3 billion merchandise trade deficit for all of 1987. For the first eight months of this year, the deficit has been running at an annual rate of $139 billion.

The 1.1% drop in import prices from July through September was the first since a 3.3% decline in the first quarter of 1986, which was attributed primarily to a fall in energy prices.

Lower oil prices also played a large part in the July-September drop. Without a 7.1% plunge in the price of imported energy, the overall import decline would have been a smaller 0.6%.

There were also declines in other areas, including a 1.1% drop in imported food prices and a 0.5% reduction in machinery prices.

Even with the July-September decline, import prices are still 4.1% higher than they were a year ago.

Food Prices Up 14.8%

The 2% rise in export prices followed a 2.8% increase in the April-June quarter. Export prices are 8.7% higher than a year ago.

Food exports led the list of third-quarter price increases, shooting up 14.8%, a reflection of the impact of the summer drought in the Farm Belt.

Food exports had risen by 8.6% in the second quarter and are 36.8% higher than a year ago.

The category of machinery and transport equipment, which constitutes nearly one-half of U.S. exports, rose by 0.5% in the third quarter after a 0.8% rise in the second quarter.

Prices of crude materials, which had been rising rapidly, edged up just 0.6% in the third quarter, the smallest increase in two years.