Consumer Prices in U.S. Unexpectedly Drop


The cost of living in the U.S. unexpectedly dropped in April for the first time in more than a year, signaling the world’s largest economy is recovering without causing prices to flare.

The 0.1 percent fall in the consumer price index was the first decrease since March 2009, figures from the Labor Department showed. Excluding food and fuel, the so-called core rate was unchanged, capping the smallest 12- month gain in four decades.

Retailers such as Wal-Mart Stores Inc. are cutting prices to bolster sales as customers face almost 10 percent unemployment and rising foreclosures. The lack of inflation, which may be reined in even more by the European debt crisis, is one reason Federal Reserve policy makers have pledged to keep the benchmark interest rate near zero in coming months.

In the 12 months ended in April, prices rose 2.2 percent following a 2.3 percent year-over-year gain the prior month.

The core rate rose 0.9 percent from April 2009, the smallest increase since January 1966, after a 1.1 percent year- over-year advance the prior month.

Compared with a month earlier, energy costs dropped. Gasoline prices fell 2.4 percent.

Food prices, which account for about 15 percent of the CPI, rose 0.2 percent, reflecting higher meat costs.

Declining prices for clothing and household furnishings helped offset increases in airline fares, recreation and medical care, leading to the unchanged reading in core prices.

Owners-equivalent rent, one of the categories designed to track rental prices, was unchanged. Compared with April 2009, owners-equivalent rent dropped 0.2 percent.

The CPI is the broadest of three monthly price gauges from Labor, because it includes goods and services. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.


TradingEconomics.com, Bloomberg
5/19/2010 10:38:25 AM