US consumer prices dropped by the most since the Great Recession in April, weighed down by a plunge in demand for gasoline and services including airline travel as Americans stayed home during the coronavirus crisis.
The report from the Labor Department on Tuesday also showed a record decline in underlying prices last month, raising the specter of a bout of deflation as the economy sinks deeper into a recession triggered by lockdowns to slow the spread of COVID-19, the respiratory illness caused by the coronavirus.
The government reported last Friday that the economy lost 20.5 million jobs in April, the deepest plunge since the Great Depression. The economy contracted in the first quarter at it steepest pace since the 2007-09 downturn. Deflation, a decline in the general price level, is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.
"The economic collapse has taken a dangerous turn where now it is consumer prices that are being pulled down into the abyss as consumers sitting at home have postponed their purchases," said Chris Rupkey, chief economist at MUFG in New York.
The consumer price index tumbled 0.8% last month after falling 0.4% in March. That was the largest decline since December 2008 when the economy was in the throes of a recession, and marked the second straight monthly decrease in the CPI.
Gasoline prices plunged 20.6%, the largest decline since November 2008, after tumbling 10.5% in March. Cheaper gasoline offset a 1.5% surge in food prices last month, which was the largest gain since January 1990, after a 0.3% rise in March.
Prices for food consumed at home accelerated 2.6%, the largest advance since February 1974, amid broad gains in all six major grocery store food groups.
There have been shortages of meat amid COVID-19 outbreaks at processing plants. The cost of food consumed at home increased only 0.5% in March. In the 12 months through April, the CPI gained 0.3%, the smallest annual rise since October 2015, after increasing 1.5% in March.
Economists polled by Reuters had forecast the CPI falling 0.8% in April and rising 0.4% year-on-year.
The Labor Department said in-store data collection has been suspended since March 16. The department added that data collection last month was also impacted "by the temporary closing or limited operations of certain types of establishments," leading to "an increase in the number of prices being considered temporarily unavailable and imputed."
Excluding the volatile food and energy components, the CPI dropped 0.4% in April, the largest decline since the series started in 1957. The so-called core CPI dipped 0.1% in March, which was the first drop since January 2010.
Underlying inflation was depressed in April by a record 8.1% plunge in the cost of hotel and motel accommodation. It was also cheaper to fly last month, with the cost of airline fares tumbling a record 15.2% after decreasing 12.6% in March. Apparel dropped a record 4.7% last month after declining 2.0% in March.
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