Consumer prices drop, signaling possibly weaker economy

The Consumer Price Index, which measures the cost of man common goods, dropped by 0.3 percent, the first decrease in a year, the Labor Department reported Friday. That happened despite the largest single-month increase in the cost of groceries in three years. File photo by Davizro Photography/Shutterstock

April 14 (UPI) — The consumer price index fell in March, the Labor Department reported Friday, signaling low inflation and a potentially softer economic environment for many businesses as demand for products dropped.

Economists said the one-month drop of 0.3 percent in the consumer price index — the first such decrease in a year — was not enough to signal a clear downward trend or cause worry. The drop could reverse itself in next month’s figures, they noted.

Bloomberg reported the CPI drop was mainly due to cheaper apparel, technology and motor vehicles.

While things being less expensive can help those with lower incomes save money, it also signals a global and domestic drop in demand that can hurt businesses and signal a weakening economy.

The CPI drop came as the Federal Reserve moved to increase a key interest rate, meaning the central bank saw enough stability in the economy to strengthen the dollar, risking higher inflation.

Continued downward pressure on the CPI would likely force the Fed to at least re-evaluate plans for future rate hikes, if not scrap them entirely until prices for many common consumer goods stabilize.

“One very soft month does not make a new trend, though, so we will be looking for a clear rebound in April,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a note after the report. “Another month like March, though, and a June rate hike will become much less likely.”

The overall CPI decrease came despite the largest one-month increase in grocery food costs in nearly three years.

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