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First Cut: December Import Price Index continued petroleum-driven decline

The December Import Price Index fell 1.0% after down 1.9% in November, a second month in a row where sharp declines in petroleum prices drove the overall index lower. Excluding petroleum import prices were up 0.3% in December after flat in November. Petroleum prices fell 11.6% in December after down 16.0% in November. The headline decrease was close to market expectations and presented no real surprises.

Compared to a year ago, the index was down 0.6%, sharply decelerating from the up 0.5% in November and up 3.4% in October. However, excluding petroleum, the year-over-year increase was up 1.0%, in line with the up 0.6% in November and up 0.8% in October.

With little underlying change in the upward price pressure for imported goods, the FOMC will have no particular reason to look for any fundamental difference in the inflation impact from imports. Prices for finished goods remained essentially unchanged and on track. Capital goods import prices inched down 0.1%, automobiles and parts nudged up 0.1%, and consumer goods excluding autos were also marginally higher at up 0.1%. Prices for petroleum and other energy commodities have been the major factor in fluctuations in import prices with only a small contribution from the firming in the US dollar relative to other currencies.

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