WASHINGTON (Reuters) – U.S. import prices fell unexpectedly in December amid falling oil product costs, adding to signs that the worst of high inflation was likely over.

Import prices fell 0.2% last month, the first drop since August, after rising 0.7% in November, the Labor Department said Friday. In the 12 months to December, prices rose 10.4% after rising 11.7% in November.

Economists polled by Reuters had forecast import prices, excluding tariffs, to rise 0.3%.

The government announced on Thursday that producer prices rose just 0.2% in December, the smallest increase since November 2020. Hopes that inflation has peaked or is on the verge of to reach were boosted by a moderation in producer prices in China in December. Economists expect the slower Chinese PPI to eventually feed through to US prices. Supply chains are also improving.

Imported fuel prices fell 6.5% last month after rising 2.3% in November. Oil prices fell 6.0%, while the cost of imported food rose 0.5%.

Excluding fuel and food, import prices rose 0.5%. These so-called core import prices rose 0.6% in November. They increased by 5.7% over one year in December.

The report also showed that export prices fell 1.8% in December after rising 0.8% in November. Agricultural export prices rose 0.8%. Non-agricultural export prices fell 2.1%.

Export prices rose 14.7% year-on-year in December. This followed an 18.2% annual increase in November.