U.S. underlying inflation declined by a record amount in April as the coronavirus crisis sent consumer prices into a “disinflationary shock.”

The Labor Department reported Tuesday that the core consumer price index, which excludes food and fuel costs, fell 0.4% in April — the largest monthly drop since the government began compiling the data in 1957.

Core CPI had declined 0.1% in March, the first month of coronavirus lockdowns that have decimated consumer demand in the U.S. The back-to-back declines were the first in 37 years.

Overall, consumer prices dropped 0.8% last month, the biggest decline since the 2008 Great Recession, as gas prices plunged almost 21%. The pace of inflation over the past 12 months slowed to 0.3% from 1.5% in March and 2.5% at the start of 2020.

“This is a disinflationary shock,” Aneta Markowska, chief financial economist for Jefferies Group, said.

As MarketWatch reports, the pandemic has put “severe downward pressure on prices despite an emergency infusion of $3 trillion in federal aid to support the economy.”

“The Federal Reserve should be more worried about deflation, when prices are falling broadly in the economy, rather than inflation, when prices are rising. If deflation becomes embedded in the economy, it can be difficult to uproot,” Gus Faucher, chief economist at PNC, told CNBC.

“If prices are falling, consumers and businesses may wait to make purchases, assuming that prices will be even lower in the future; this can exacerbate economic downturns,” he added.

The April price declines were broad, with clothes and transportation both down 4.7%, car and truck rentals down 16.6%, and airline fares down 15.2%. Demand for groceries, however, spiked, fueling a record 2.9% monthly increase in the index for cereals and baking products.

“The big question is what could lie ahead — while today’s numbers reflect a severe period of deflation it’s only a matter of time for the effects of massive fiscal stimulus to take hold in the form of inflation once consumers are back on their feet and demand rebounds,” Mike Loewengart, managing director of investment strategy at E-Trade, told Business Insider.

(Photo by Suzanne Kreiter/The Boston Globe via Getty Images)

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