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May 10, 2017 11:30 AM, EDT

Petroleum, Motor Vehicles Boost US Import Prices

Mario Anzuoni/Reuters

U.S. import prices increased more than expected in April amid rising costs for petroleum products and a range of other goods, which could help boost domestic inflation and keep the Federal Reserve on course for further interest rate hikes.

The Labor Department said on May 10 that import prices jumped 0.5% last month after gaining 0.1% in March. It was the fifth straight monthly increase and beat economists' expectations for a 0.2% advance.

"Higher import prices today helps build the case for another rate hike at the June Fed meeting as the deflation threat has long passed for this economic cycle," said Chris Rupkey, chief economist at MUFG Union Bank in New York.

In the 12 months through April, import prices rose 4.1% after increasing 4.3% in March. Prices shot up 4.7% on a year-on-year basis in February, the biggest gain in five years. They are rising as the drags from a strong dollar and weak global import prices fade.

U.S. financial markets were little moved by the data amid investor caution after President Donald Trump on May 9 abruptly fired FBI Director James Comey.

In April, prices for imported petroleum rebounded 1.6% after declining 0.4% in March. Import prices excluding petroleum gained 0.4%, the biggest increase since July 2016, after edging up 0.1% in the prior month.

Import prices excluding petroleum have now risen for four straight months, in part reflecting the dollar's 3% decline against the currencies of the United States' main trading partners this year.

Import prices excluding petroleum rose 1.4% in the 12 months through April, the largest increase since March 2012.

The steady rise in underlying import prices could over time put upward pressure on consumer inflation.

"With job gains rebounding to decent levels, only some sudden deceleration in inflation might slow the Fed from its appointed round of rate hikes," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pa.

"Well, it doesn't look like inflation is going to decelerate anytime soon," he added.

The U.S. central bank raised its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year.

Prices for imported capital goods rose for a third straight month in April, while the cost of imported motor vehicles surged 0.5%, the biggest gain in five years. Imported food prices increased 0.3%.

The cost of goods imported from China dipped 0.1% last month, leading to a 1.2% decline on a year-on-year basis. Prices have not risen on a yearly basis since October 2014.

The report also showed export prices increased 0.2% in April after rising 0.1% in March. Prices rose 3% year-on-year after increasing 3.4% in March.

Prices for agricultural exports advanced 0.3% last month as a record 37.9% jump in vegetable prices offset falling prices for soybeans, corn and wheat. In the 12 months through April, agricultural export prices rose 4.6%.