The Labor Department said on Tuesday U.S. import prices recorded their biggest increase in more than four years in May, fueled by higher costs for petroleum and other products. The report indicates potential firming of inflation, which could lead to the Federal Reserve hiking interest rates later this year.
U.S. import prices rose by 1.4% last month after an upwardly revised 0.7% gain in April. It was the largest rise since March 2012.
Economists polled by Reuters had forecast import prices rising 0.7% in May after April’s previously reported 0.3% gain. In the 12 months through May, import prices fell 5.0%, the smallest decline since November 2014.
The relative strength of the U.S. dollar (USDUSD) and cheap oil prices between June 2014 and December 2015 weighed down inflation. Since then, the U.S. dollar lost 1.5% against the currencies of the United States’ main trading partners this year and oil prices near $50 per barrel.
Last month, imported petroleum prices skyrocketed by 17.4% after rising 11% in April, the largest increase since 1999. Excluding petroleum, import prices rose 0.4%, the first monthly increase since March 2014, after being unchanged in April.
Imported food prices edged up 0.3% last month, while prices for imported industrial supplies and materials excluding petroleum increased 1.6%. That’s the latter’s biggest rise since February 2014.
Imported capital goods prices were flat, but the cost of imported automobiles gained 0.2%, which was the biggest gain since April 2014. Prices for imported consumer goods excluding autos edged up slightly by 0.1%.
The Labor Department report also found export prices increase 1.1% in May after rising 0.5% in April, which is the biggest gain since March 2011. However, export prices have fallen 4.5% from a year ago, the smallest drop since December 2014.