Price drop was fastest since 1955 for consumers
4/16/2009WASHINGTON - Consumer prices nationwide dipped unexpectedly in March, leaving prices over the past year falling at the fastest clip in more than a half-century.
The recession is expected to keep a lid on inflation as layoffs dampen wage pressures and weak demand keeps companies from raising prices.
The U.S. Labor Department said yesterday that consumer prices edged down 0.1 percent last month as a drop in energy prices offset the biggest rise in tobacco prices in more than a decade. It was a better performance than the 0.1 percent rise in the Consumer Price Index that economists had expected.
Over the past 12 months, consumer prices have fallen 0.4 percent, the first 12-month decline since a similar drop for the year ending in August, 1955.
Meanwhile, the Federal Reserve said yesterday that its latest survey of business conditions nationwide found five of its 12 regional banks reported a moderation in the pace of the economic decline.
The Fed said several regions "saw signs that activity in some sectors was stabilizing at a low level ... [but] overall economic activity contracted further or remained weak."
For the Cleveland Fed region, the picture was not pretty.
Factory output, new orders, and steel shipments continued downward, home construction remained "very depressed," and retail sales showed "a slight improvement," the report said.
Separately, the Fed reported that production at the nation's factories, mines, and utilities dropped a seasonally adjusted 1.5 percent in March, the fifth straight monthly decline. That matched February's drop and was worse than the 1 percent dip analysts expected.
Core inflation, which excludes energy and food, rose 0.2 percent last month, matching the gains of the past three months. It was slightly higher than the 0.1 percent rise economists expected.
Some economists worry that all of the moves the Federal Reserve has made to fight the recession and the worst financial crisis in 70 years could be sowing the seeds for inflation troubles down the road.
For March, energy prices fell 3 percent, reversing a 3.3 percent jump in February. Gasoline prices fell 4 percent last month, home heating oil plunged 8.5 percent, and natural gas slid 4.8 percent.
Food costs dropped 0.1 percent in March. Dairy products led the decline with a drop of 2.4 percent.
More than half the increase in costs outside of food and energy came from an 11 percent rise in tobacco prices, the biggest one-month surge in that category since December, 1988.