US consumer inflation in steepest drop since 1950

AFP - 2 hours 20 minutes ago

WASHINGTON (AFP) - - US consumer prices held unchanged in July, leaving a year-over-year drop that was the steepest since 1950, government data showed Friday.

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The Labor Department said its consumer price index (CPI) was flat in the month of July as small declines in food and energy prices offset a small increase in all other components.

Most analysts had forecast that the seasonally adjusted CPI would be flat as the world's largest economy struggles in its worst recession since the Great Depression.

"The overriding message in the report is that inflation is not a problem at this point," Briefing.com analysts said in a client note.

On a 12-month basis, consumer prices fell 2.1 percent from July 2008, the sharpest plunge since 1950.

However, a year ago inflation was high due to surging food and energy prices. After the collapse of Wall Street investment bank Lehman Brothers in September triggered a global financial meltdown and worldwide recession, consumer prices have fallen in the face of weak demand.

The Labor Department left unrevised a 0.7 percent leap in the June CPI, the strongest rise since July 2008. The increase was due to a jump in gasoline prices and had followed three months of virtually flat inflation.

In July, core CPI, which excludes volatile food and energy prices, rose 0.1 percent, slowing from a 0.2 percent rise in June, the department said.

Core CPI was up 1.5 percent from July 2008, compared with a 1.7 percent annualized rise in June.

Those inflation levels are considered to be within the comfort zone for the Federal Reserve in setting monetary policy.

The Fed this week maintained its exceptionally low key interest rate near zero, as expected, to support the ailing economy and reiterated its outlook for subdued inflation.

Energy prices in July fell 0.4 percent, following a 7.4 percent leap in June, and were 28.1 percent below the year-ago level, the department said.

Food prices dropped 0.3 percent, the strongest monthly decline since May 2002. On an annual basis, July food prices were up 0.9 percent.

Services prices were stable in July. Housing services, including rentals, fell 0.2 percent, their sharpest drop since 1982.

In a separate report, the department said the average hourly wage rose 0.2 percent in July, after falling 1.2 percent in June.