MercoPress. South Atlantic News Agency

US March consumer prices mark new annual declination record

United States consumer prices fell in March and recorded their first annual drop in more than half a century, according to official figures from the Labour Department. The consumer price index fell 0.1% last month after energy prices declined. In February prices had risen 0.4%.

March's fall meant consumer prices were down 0.4% from a year ago, the first annual decline since 1955.

Separately, the Federal Reserve said US industrial production fell 1.5% in March, more than analysts had forecast.

The fall in the cost of living had not been expected. Analysts had expected prices to rise by 0.1%.

“The numbers speak to an economy that is in deep recession, but we're no longer in the shock mode of staggering numbers,” said Peter Kenny, managing director at Knight Equity Markets.

The US Labor Department said that the cost of energy decreased, particularly fuel oil, natural gas and motor fuel. Food prices also declined.

Some economists have expressed fears the recession could trigger a prolonged period of falling prices, known as deflation. This can undermine consumer spending and corporate profits, making a recession even worse.

But others worry that the measures the US government and Federal Reserve have taken to fight the financial crisis could lead to soaring inflation in the long term.

The fall in production was the fifth consecutive monthly decline.

“The huge declines in industrial production in the past two quarters reflect very aggressive cuts in inventories by businesses,” said Nariman Behravesh at IHS Global Insight.

But with stockpiles having been run down considerably, production may be levelling out, he suggested. “The potentially good news is that businesses are now close to getting their inventories under control.”

According to the Labour Department in March, energy was down 0.3%; food, -0.1%; clothing, -0.2%; transport, -0.1% while medical care was up 0.2%.