WASHINGTON—Prices of imported goods in October posted their largest monthly decline in more than two years, the latest sign that lower oil costs and weak overseas economies are holding down U.S. inflation.
Import prices fell 1.3% from September, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had forecast a decline of 1.2%.
Compared with one year earlier, prices fell 1.8%, matching the largest annual decline since November 2013.
Import prices have fallen for four straight months amid a steady drop in oil prices that stem from rising supplies and weaker global demand. U.S. crude oil prices fell below $75 a barrel on Thursday to the lowest level in more than four years. Prices are down around 30% since hitting a peak in June.
Friday’s report said petroleum import prices fell 6.9% in October from the previous month and were down 11.1% on the year. Those were the largest declines since the middle of 2012.
Excluding petroleum, import prices were down 0.1% from the previous month and up 0.5% from a year earlier.
Economists expect the drop in fuel prices should boost spending, benefiting retailers during the holiday shopping season. Consumers stand to get a break not only at the gas pump but also on their winter heating bills.
Cheaper prices on imported goods also reflect the strengthening of the dollar, which will put pressure on American exporters. A slowdown in Europe and Asia could put new pressure on the U.S. economy, particularly if import prices fall further on the back of cheaper foreign currencies and weaker foreign demand.
Import prices from China and Japan both increased 0.1% in October. Falling fuel prices drove declines elsewhere. Prices from the European Union decreased 0.2%. Prices of Mexican imports fell 0.9%, and prices for Canadian imports dropped 2.3%.
Last month, Japan’s central bank and its main government pension fund said they would pump trillions more yen into the country’s faltering economy. European Central Bank President Mario Draghi last week said the central bank stood ready to provide further stimulus to revive eurozone growth and boost inflation.
Prices and wages in the U.S. and other developed economies have risen slowly in recent years. The Federal Reserve sets a 2% target for inflation, but U.S. prices have undershot that target for more than two years, according to the central bank’s preferred gauge of inflation.
For now, low inflation has taken pressure off the Fed to start raising interest rates, which have been effectively at zero since December 2008. “It is still premature to begin to raise interest rates. There remains slack in the labor market, and the inflation rate is still too low,” New York Fed President William Dudley said in a speech on Thursday.
