Consumer Price Index

A key measure of U.S. consumer prices declined in April by the most on record as travel and apparel spending collapsed during the coronavirus pandemic.

The core consumer-price index, which excludes volatile food and fuel costs, fell 0.4% from the prior month after a 0.1% decrease in March, Labor Department figures showed Tuesday. That’s the biggest drop in data back to 1957. Compared with April of last year, the core CPI rose 1.4%, the smallest annual gain since 2011.

The overall CPI declined 0.8% in April from a month earlier, the most since December 2008, as gasoline prices plunged 20.6%. Annual consumer inflation slowed to 0.3%, the smallest increase since 2015.

But the cost of food at home surged 2.6% from the prior month, the most since 1974, as Americans stocked up at grocery stores. Prices for bread, chicken, carbonated drinks and snacks all posted record increases, as did household paper products.

The report adds inflation to the list of economic indicators showing an historic impact from the Covid-19 pandemic. A sustained trend of declining prices would spur worries about deflation, exacerbating concern that the recovery from the deep economic downturn will be very slow. Federal Reserve policy makers often look to the core index for a better gauge of underlying price trends.

“The consumer price index numbers are just frightening,” Claudia Sahm, a former Fed economist who is now director of macroeconomic policy at the Washington Center for Equitable Growth, said on Bloomberg Radio. “I am very worried that we are falling into a deflationary spiral.”

Source: Bloomberg