Consumer Prices in U.S. Unexpectedly Fell in April

Beauru of Labor and Statistics released the latest Consumer Price Index (CPI) numbers:

On a seasonally adjusted basis, the Consumer Price Index for All

Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S.

Bureau of Labor Statistics reported today. Over the last 12 months,

the index increased 2.2 percent before seasonal adjustment.

 

The index for energy decreased 1.4 percent in April and accounted for

the seasonally adjusted decline in the all items index. The indexes

for gasoline and natural gas both decreased significantly,

outweighing increases in the indexes for fuel oil and electricity.

 

The food index increased 0.2 percent in April, while the index for

all items less food and energy was unchanged. The index for meats,

poultry, fish, and eggs rose sharply in April and accounted for the

food increase; other grocery store food groups were mixed and the

index for food away from home rose slightly. Within all items less

food and energy, the indexes for recreation, airline fares, and

medical care all rose in April. Offsetting these increases were

declines in the indexes for apparel and for household furnishings and

operations. The continuing stability of the index for all items less

food and energy has resulted in an increase over the last 12 months

of 0.9 percent, the smallest 12-month increase since January 1966.

 

Bloomberg:

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 today in Washington. 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.

“There simply isn’t any kind of price pressure of any consequence in the economy,” said David Resler, chief economist at Nomura Securities International Inc. in New York, who accurately forecast the decline in prices. “This puts the Fed firmly in place for the foreseeable future.”

Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,112.9 at 8:43 a.m. in New York. Treasury securities were also lower, pushing the yield on the benchmark 10-year note up to 3.37 percent from 3.35 percent late yesterday.

Rise Projected

Consumer prices were forecast to rise 0.1 percent, according to the median forecast of 79 economists in a Bloomberg News survey. Estimates ranged from a drop of 0.2 percent to a gain of 0.4 percent. Costs excluding food and energy were projected to rise 0.1 percent.

In the 12 months ended in April, prices rose 2.2 percent following a 2.3 percent year-over-year gain the prior month. Economists had forecast a 2.4 percent rise in the 12 months to April, according to the survey median.

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.

Calculated Risk CPI declines 0.1%, Core CPI Flat:

Owners' equivalent rent (OER) is now down slightly year-over-year.

The disinflationary trend continues - and with all the slack in the system (especially the 9.9% unemployment rate), it is hard to see inflation picking up any time soon. The high unemployment rate and low measured inflation suggest the Fed will hold the Fed funds rate at the current level for some time

 

Posted via email from Jim Nichols