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Business

Consumer prices drop for the first time since 1955

Latest update : 2009-04-15

US consumer prices fell 0.1 percent in March from the previous month and declined 0.4 percent from a year ago, the first annual drop in 54 years.The decrease was due to a downturn in energy prices, particularly gasoline prices.

AFP - US consumer prices fell 0.1 percent in March from a month ago and declined 0.4 percent from a year ago, the first annual drop in 54 years amid economic meltdown, government data showed Wednesday.
  
On a seasonally adjusted basis, the consumer price index (CPI), a measure of the average price of consumer goods and services purchased by households, decreased 0.1 percent in March after rising 0.4 percent in February, according to Labor Department data.
  
The decrease, it said, was due to a downturn in energy prices, particularly gasoline prices, which declined 3.0 percent in March after rising 3.3 percent the previous month.
  
Most analysts had expected a 0.1 percent month-on-month rise in March.
  
Core CPI, which excludes food and energy prices, increased 0.2 percent for the third month in a row in March, thanks to a sharp increase in prices for tobacco and smoking products. The core rate was up 1.8 percent from March 2008.
  
The department also said that prices in March had decreased 0.4 percent from a year ago, "the first 12-month decline since August 1955," in what is seen as a potential threat of deflation -- or a price decline on a sustained basis -- as the United States reels from prolonged recession.
  
The annual inflation figure could continue to decline in the months ahead and "become significantly negative -- hitting negative 2.3 percent in July -- as a result of a large base effect" in which oil prices had reached record peaks above 147 dollars last July, said Marie-Pierre Ripert, an economist with Natixis bank.
  
Core inflation, she added, "will remain on a downward trend all over the year and will pass below one percent ... meaning that the risk of deflation will not disappear rapidly."
  
Analyst Patrick O'Hare of Briefing.com agreed.
  
"It is very possible that the core rate drops to near zero the next couple of months," he said.
  
"The CPI data are borderline but don't reflect significant price pressures.  Not too much emphasis should be placed on the slightly higher-than-expected core rate increase.

Date created : 2009-04-15

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