US consumer prices fell in March and recorded their first 12-month drop since 1955, government data showed today, as slumping demand amid a severe recession pushed down energy and food costs.
The Labor Department said its closely watched Consumer Price Index fell 0.1 per cent, after increasing 0.4 per cent in February.
On a year-over-year basis, consumer prices dived 0.4 per cent, the first 12-month decline since August 1955.
"The numbers speak to an economy that is in deep recession, but we're no longer in the shock mode of staggering numbers that speak to a serious slide lower in terms of macroeconomic activity, coupled with the threat of inflation," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
US equity index futures pared losses on the data, while US government bond prices were little changed and the US dollar extended gains versus the yen.
The data, coming on the heels of a report yesterday showing prices received by US producers fell 1.2 per cent last month, could revive fears of deflation.
Producer prices slumped 3.5 per cent in March compared to the same period a year earlier, the largest decline since 1950.
Deflation is a broad-based decline in prices that can undercut an economy by leading consumers to hold off purchases in the hopes of even lower prices.
Energy prices dropped 3 per cent in March after rising 3.3 per cent the previous month. The food index eased 0.1 per cent for a second straight month in March, the department said.
Core prices, which exclude food and energy items, rose 0.2 per cent after rising by the same margin in February.
That compared to analysts' prediction for a 0.1 per cent increase. Core prices have risen by 0.2 per cent for three months in a row.
March core prices were lifted by increased costs for tobacco, which accounted for over 60 per cent of the rise, and vehicles.
Core prices rose 1.8 per cent year over year.
Reuters