Economic Report: Import prices aren’t adding much to inflation anymore thanks to a strong dollar

The numbers: The cost of imported goods rose just 0.2% in June — the smallest increase in six months — in a sign the U.S. is no longer importing as much inflation as it had been in the past year and a half.

Economists polled by The Wall Street Journal had estimated a 0.7% advance.

Most of the increase was tied to a surge in oil prices in June. Oil prices have fallen sharply this month, however.

If fuel is excluded, import prices fell in June for the second month in a row. The last time that happened was in the first two months of the pandemic in 2020.

A big reason why import prices aren’t going as much is because of the rising value of the U.S. dollar. A strong dollar allows Americans to buy foreign products at lower prices than they previously had been paying.

Goods and services produced in the U.S. are still increasing rapidly in cost, though. The consumer price index shot up again in June and pushed the yearly rate of inflation to 9.1% — the highest level in 41 years.

Big picture:Falling prices of oil and other key staples such as corn and wheat might help ease the stress of high inflation on families, businesses and investors in the next few months — but only if it lasts.

Now they also have something else to worry about: The growing risk of recession.

The Federal Reserve is raising interest rates aggressively to try to slow the economy and tame inflation. The central bank has little room for error, economists warn, and just a few missteps could trigger a second downturn in three years.

Key details: Import prices in the past year have moved up 10.7%, but the rate has slowed from as high as 13% in March.

If fuel is set aside, import prices have risen at a smaller 5.4% pace in the past year.

In June, the cost of fuel leaped 5.7% and accounted for pretty much all of the increase in import prices

Yet in a sharp turnabout, oil prices have tumbled to as low as $95 a barrel from $122 last month. That should help moderate inflation in the July report on import prices.

Export prices rose 0.7% in June, and they are up 18.2% in the past year.

Looking ahead: The back-to-back declines in the cost of foreign goods minus fuel “represents a glimmer of hope in the inflation outlook,” said chief economist Joshua Shapiro of MFR Inc.

Market reaction: The Dow Jones Industrial Average

and S&P 500

rose sharply in Friday trades, helped by some positive news on the economy.

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