Impact of the Strengthening Dollar on U.S. Import Prices in 2015

Abstract

The Bureau of Labor Statistics (BLS) import price index measures changes in prices of goods purchased from abroad by residents of the United States. The index declined throughout most of 2015 and ended the year with an 8.3-percent decrease from the December 2014 figure. Declines in prices of commodities such as oil, gold, other precious metals, and copper were an important factor behind the fall in the import price index. Those declines, as well as declines in prices for finished goods, were all caused in part by the strengthening of the U.S. dollar against the foreign currencies of the nation’s major trading partners in 2015. When the U.S. dollar strengthens, or appreciates, imports from other countries cost less. Each dollar buys more foreign currency. This change in the relative value of the dollar effectively lowers the dollar price that U.S. importers pay for items bought from other countries.