UPDATE 2-U.S. import prices post biggest fall in five months

Wed Dec 12, 2012 1:34pm EST

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* Import prices fall 0.9 percent, largest drop since June

* Prices excluding food, fuels dip 0.1 percent

* Export prices drop 0.7 percent, largest fall since June

By Lucia Mutikani

WASHINGTON, Dec 12 (Reuters) - U.S. import prices recorded the biggest drop in five months in November as food and fuel costs tumbled, keeping inflation pressures subdued against the backdrop of a weak economy.

The Labor Department said on Wednesday import prices fell 0.9 percent after three straight months of gains. October's data was revised to show a 0.3 percent increase rather than the previously reported 0.5 percent gain.

Economists polled by Reuters had expected import prices to fall 0.5 percent last month. In the 12 months to November, import prices fell 1.6 percent.

Stripping out fuels and food prices, import prices dipped 0.1 percent as the cost of capital goods fell by the most since March 2010 and automobile prices were flat, indicating that broader inflation pressures remained benign.

"The global economy is restraining prices here and abroad. This indicates global demand is soft and will remain soft in the near term," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh.

"This adds to the perception that inflation is not a concern."

The tame inflation environment should allow the Federal Reserve to stay on its ultra-easy monetary policy course as it tries to nurse the economy back to health.

The U.S. central bank on Wednesday pledged to keep interest rates near zero until the unemployment rate fell to 6.5 percent. It said this commitment would hold for as long as inflation was projected to be no more than 2.5 percent one or two years ahead and inflation expectations were contained.

Data on Thursday is expected to show that weak energy costs depressed wholesale prices in November for a second month in a row, according to a Reuters survey of economists.

Last month, imported petroleum prices fell 3.6 percent after slipping 0.2 percent in October. The price of imported natural gas surged 18.2 percent, the largest increase in three years. Imported food prices fell 1.3 percent, the biggest decline since February, after edging up 0.2 percent the prior month.

Elsewhere, imported capital goods prices fell 0.3 percent after being flat in October. Imported motor vehicle prices were unchanged after rising 0.3 percent the previous month.

The Labor Department report also showed export prices fell 0.7 percent last month, the largest drop since June. Export prices were flat in October.

Export prices were last month weighed down by declines in prices for industrial supplies and materials. Prices for nonagricultural industrial supplies and materials also fell as did prices for consumer goods excluding automobiles.

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