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US consumer prices stay flat

UNITED States consumer prices were flat last month, while industrial production fell by the smallest amount in six months - further evidence that the recession's grip is slowly easing.

The disappearance of inflation has been a product of America'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 yesterday said its Consumer Price Index was flat last month after dipping 0.1 percent in March, 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 ended in June 1957.

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

The Fed said output by the nation's factories, mines and utilities fell 0.5 percent last month, after revised declines of 1.7 percent in March and 1 percent in February. Analysts expected a drop of 0.6 percent last month.

Still, the report showed US industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 percent since then.

"Overall, yet another report that fits within the picture of an economy contracting more slowly but still far from an actual recovery," Paul Ashworth, senior US economist at Capital Economics, wrote in a note yesterday.

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

Consumers in the US and overseas - fearful of losing their jobs or homes - likely will remain cautious spenders in the months ahead, a Fed official pointed out yesterday.




 

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