By Lucia Mutikani
WASHINGTON, April 15 (Reuters) - U.S. import prices increased less than expected in March, though the trend still pointed to firming imported inflationary pressures as the Middle East conflict boosts oil prices and snarls supply chains.
Economists shrugged off the report from the Labor Department on Wednesday and said they expected the oil price surge from the U.S.-Israeli war with Iran to show in April's import price data.
"The less-than-expected increase in import prices most likely
reflects timing differences between when the oil that entered U.S. ports was shipped and the spot price of oil," said John Ryding, chief economic advisor at Brean Capital. "The average crude oil price arriving in the United States in March was up 7.8% compared to a Brent price of 45.5%. The bulk of the March oil price increase has yet to show up in this report."
Import prices rose 0.8% last month after a downwardly revised 0.9% gain in February, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast import prices, which exclude tariffs, increasing 2.0% after a previously reported 1.3% rise in February.
The BLS asks businesses to provide import prices for the first business day of the month, or as close to that day as possible.
Oil prices have jumped more than 35% since the conflict started at the end of February. President Donald Trump has imposed a blockade of the Strait of Hormuz, which halted seaborne trade in and out of Iran. The war has also disrupted shipments of commodities, including fertilizer.
In the 12 months through March, import prices shot up 2.1%. That was the largest year-on-year rise since December 2024, and followed a 1.0% increase in February.
"Whether it is higher shipping costs from supply disruptions or foreign manufacturers no longer offsetting the tariffs with their own product price cuts, import price inflation is on its way up, and then adding insult to injury, once the ships dock here, the imported goods are hit with the tariffs," said Christopher Rupkey, chief economist at FWDBONDS. "The consumer is losing, and will continue to lose."
Higher oil prices raised consumer and producer prices in March, government data showed recently.
Imported fuel prices rose 2.9% last month after advancing 2.4% in February. Imported natural gas prices tumbled 71.0%. The BLS said effective with March's report, "directly collected data for import natural gas prices is replaced with non-survey sources for price index calculation." It said the switch to an alternative data source did not create a break in the series.
Imported food prices gained 0.5%. Excluding food and energy, import prices increased 0.6% after rising 0.9% in February. The so-called core import prices soared 3.5% in the 12 months through March.
Stocks on Wall Street rose. The dollar was little changed against a basket of currencies. U.S. Treasury yields fell.
HOMEBUILDER SENTIMENT DETERIORATES
Prices of imported capital goods advanced 0.5% amid strong increases in the costs of nonelectrical machinery and transportation equipment excluding motor vehicles. Imported consumer goods prices, excluding automobiles, rose 0.4%.
Prices of imports from China surged 0.7%, the largest gain since December 2021. Prices, however, dropped 1.1% year-on-year. Prices for imports from Mexico increased 0.8%.
Imported air passenger fares rebounded 2.0% after falling 0.4% in February.
Based on the CPI, PPI and import price data, economists estimated that the Personal Consumption Expenditures price index jumped 0.7% in March after climbing 0.4% in February. That would translate into a year-on-year increase of 3.5% and follow a 2.8% rise in February.
Core PCE inflation was forecast to have increased 0.3% in March after rising 0.4% for two consecutive months. In the 12 months through March, core PCE inflation was estimated to have advanced 3.2%, which would be the largest gain in two years. It rose 3.0% year-on-year in February.
The Federal Reserve tracks the PCE price indexes for its 2% inflation target. Financial markets are pricing in roughly a one-in-three chance of a rate cut this year. Minutes of the central bank's March 17-18 policy meeting, which were published last week, showed a growing group of policymakers last month felt that rate hikes might be needed. The Fed left its benchmark overnight interest rate in the 3.50%-3.75% range.
The Middle East conflict has also raised mortgage rates, weighing on the housing market. The National Association of Home Builders/Wells Fargo Housing Market index dropped four points to 34 in April, the lowest level since September 2025, and staying below the 50 break-even point for 24 straight months, a separate report showed.
Mortgage rates, which track U.S. Treasury yields, had fallen significantly at the start of the year amid expanded purchases of mortgage-backed securities by Freddie Mac and Fannie Mae.
The popular 30-year fixed-mortgage rate averaged 5.98% in late February, but jumped to 6.46% at the start of April and averaged 6.37% last week, data from Freddie Mac showed.
NAHB Chief Economist Robert Dietz said 62% of builders reported suppliers had increased building material costs due to higher fuel prices, including gas and diesel.
"Energy costs make up approximately 4% of residential construction material input and service costs," said Dietz. "With near-term economic risks elevated, 70% of builders reported challenges pricing homes given uncertainty about material costs."
(Reporting by Lucia Mutikani. Editing by Chizu Nomiyama, Mark Potter and Andrea Ricci )
