Decline in Import Prices Assuages Inflation Fears

U.S. import prices in March took their sharpest plunge in more than eight years as costs for imported petroleum and other products fell, the government said Wednesday, showing that the United States had little reason to fear it was importing inflation.

The Labor Department said import prices fell 1.6% in March--the largest decline since a 1.7% drop in December 1992--after a revised 0.6% dip in February.

Wall Street economists had expected a much more modest decline of 0.2% in March.

Major categories of import prices were either down or unchanged during the month. Prices of nonpetroleum imports fell 0.9%, the largest decline since a 1% drop, also in December 1992. In February, nonpetroleum import prices were down 0.8%.

Fred Breimyer, chief economist at State Street Corp. in Boston, said import prices will continue to fall “as long as the dollar is reasonably strong.”

But he said that although the data can be taken as good news regarding inflation, the costs of imported goods were only one source of price pressures.

He noted that wage increases have been fairly strong over the last year. U.S. firms have “already essentially signed off” on those wage gains, he added.

The price of imported petroleum sank 5.9% in March after a 1.1% gain in February and a hefty 6.2% drop in January.

The report said prices of goods from Canada, the largest exporter to the United States, fell by a record 3.3% in March after a 3.2% drop the previous month.