Import prices, which exclude tariffs, fell 1.4 percent in July – the largest monthly drop since April 2020.

United States import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and non-fuel costs, while consumers’ one-year inflation outlook ebbed in August, the latest signs that price pressures may have peaked.

Import prices, which exclude tariffs, fell 1.4 percent last month after rising 0.3 percent in June, the Department of Labor said on Friday.

That was the largest monthly drop since April 2020 and exceeded the 1.0 percent decline expected by economists in a Reuters news agency poll. In the 12 months through July, import prices gained 8.8 percent after a 10.7 percent rise in June, marking the annual rate’s fourth straight monthly decline.

The report followed other tentative indications earlier this week that inflation was finally coming off the boil. US consumer prices were unchanged in July due to a sharp drop in the cost of petrol, after advancing 1.3 percent in June, although underlying price pressures remained elevated. Producer prices also declined last month on the back of lower energy costs.

“Declining import prices and producer prices support the … thesis that the economy is past headline peak inflation,” said Jeffrey Roach, chief economist at LPL Financial.

The Federal Reserve is mulling whether to raise its benchmark overnight lending rate by 50 or 75 basis points at its next policy meeting on September 20-21, as the US central bank battles to cool demand across the economy and bring inflation back down to its 2 percent goal. The Fed has raised its policy rate by 225 basis points since March.

Richmond Fed President Thomas Barkin reiterated following Friday’s data that he and his fellow policymakers will not let up on raising rates until they see long-lasting evidence that price pressures are firmly on a downward path.

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“I’d like to see a period of sustained inflation under control, and until we do that, I think we are just going to have to move rates into restrictive territory,” Barkin told CNBC.

Imported fuel prices dropped 7.5 percent last month after surging 6.2 percent in June. Petroleum prices declined 6.8 percent, while the cost of imported food fell 0.9 percent, the largest one-month drop since November 2020 and third straight monthly decline.

Excluding fuel and food, import prices dropped 0.5 percent. These so-called “core import prices” decreased 0.6 percent in June. They rose 3.8 percent on a year-on-year basis in July. The strength of the US dollar is helping keep a lid on core import prices.

The dollar has gained about 10 percent against the currencies of the United States’s main trade partners since the beginning of the year.

The report also showed export prices fell 3.3 percent in July after accelerating 0.7 percent in June. Prices for agricultural exports declined 3.0 percent, with the fall led by lower prices for soybeans, wheat and cotton.

Nonagricultural export prices fell 3.3 percent. Export prices rose 13.1 percent on a year-on-year basis in July after increasing 18.1 percent in June.

Consumer sentiment

US consumer sentiment ticked further up in August from a record low earlier this year and American households’ near-term inflation outlook eased again on the back of the sharp drop in petrol prices, a survey from the University of Michigan showed.

The survey’s preliminary August reading on the overall index on consumer sentiment came in at 55.1, up from 51.5 in the prior month. It had hit a record low of 50 in June.

The preliminary August reading was above the median forecast of 52.5 among economists polled by Reuters.

The survey’s one-year inflation expectation fell to a six-month low of 5.0 percent from 5.2 percent, while the survey’s five-year inflation outlook edged up to 3.0 percent from 2.9 percent, holding within the range that has prevailed for the past year.

Data this week continues to indicate that prices pressures in the United States may have peaked.