WASHINGTON U.S. import prices increased more than expected in August as the cost of energy products surged, but underlying imported price pressures remained subdued, which bodes well for the overall domestic inflation outlook.

Import prices increased 0.5% last month, the Labor Department said on Friday. Data for July was revised lower to show prices rising 0.1% instead of the previously reported 0.4%. Economists polled by Reuters had forecast import prices, which exclude tariffs, gaining 0.3%.

In the 12 months through August, import prices dropped 3.0% after decreasing 4.6% in July. Annual import prices have now declined for seven straight months.

Data this week showed inflation making steady progress toward the Federal Reserve's 2% target, with underlying consumer and producer prices rising moderately in August.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)