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Monday, April 21, 2014
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Published: 5/15/2009

Consumer prices flat in April, matches estimates

ASSOCIATED PRESS

WASHINGTON Consumer prices were unchanged in April as both food and energy costs declined to offset gains elsewhere. Prices over the past year fell by the largest amount in more than a half-century.

The disappearance of inflation has been a product of the country s deep recession as surging job layoffs dampen wage pressures and weak consumer demand keeps a lid on price increases. Some economists are worried about a dangerous bout of falling prices, but most say that possibility remains remote because the Federal Reserve has responded with force to combat the current downturn.

The Labor Department said Friday its Consumer Price Index was flat last month, meeting economists expectations. The docile inflation performance reflected a second monthly drop in energy costs and a third straight decline in food prices.

Over the past year, consumer prices have fallen 0.7 percent, the largest 12-month decline since a similar drop for the 12 months ending in June 1957.

A destabilizing period of falling prices has not been seen in the U.S. since the Great Depression of the 1930s, although Japan suffered through a period of deflation in the 1990s.

Core inflation, which excludes food and energy, rose 0.3 percent last month, the biggest jump since July. However, 40 percent of April s gain came from a huge rise in tobacco prices, reflecting an increase in federal taxes.

Energy prices dropped 2.4 percent in April and are down 25.2 percent over the past 12 months, as prices retreat from record-highs set last spring and summer. Food costs fell 0.2 percent in April as the price of dairy products dropped sharply.

Most economists believe inflation will not be a threat for a prolonged period. The CPI followed a report Thursday that wholesale prices rose 0.3 percent in April, but fell 3.7 percent over the past 12 months, the biggest decline since 1950.

The concerns about deflation are muted in this country because of the aggressive actions taken so far by the Fed. The central bank has pushed a key interest rate to a record low near zero and has taken a number of other measures to flood the banking system with cash to deal with a severe credit crisis.

There are more worries about deflation in other parts of the world. Prices have been falling again in Japan, China and India as the global economy deals with what the International Monetary Fund has said will be the worst global downturn since the 1930s.

A year ago, the Fed was worrying about the threat of runaway inflation as prices for crude-oil and other energy products hit record-highs. But since last fall when the financial crisis hit, the Fed switched its focus to boosting economic growth.



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