U.S. producer prices fell by the most since 2009 in April, leading to the largest annual decline in nearly 4-1/2 years, bolstering some economists' predictions for a brief period of deflation as the novel coronavirus depresses demand.
WASHINGTON - U.S. producer prices fell by the most since 2009 in April, leading to the largest annual decline in nearly 4-1/2 years, bolstering some economists’ predictions for a brief period of deflation as the novel coronavirus depresses demand.
Lockdowns to slow the spread of COVID-19, the respiratory illness caused by the virus, have weighed on demand, with the economy contracting in the first quarter at its sharpest pace since the final three months of 2008. 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, worsening the economic downturn.
Economists polled by Reuters had forecast the PPI falling 0.5% in April and declining 0.2% on a year-on-year basis. The Fed tracks the core personal consumption expenditures price index for its 2% inflation target. The core PCE price index increased 1.7% year-on-year in March after rising 1.8% in February. April’s core PCE price index data will be released at the end of the month.
The decline in wholesale food prices was in stark contrast to the surge in food prices at the consumer level last month, which rose at the fastest pace since January 1990, consumer price data showed on Tuesday. The cost of services fell 0.2% last month, reversing March’s 0.2% gain. Services were held down by decreases in the costs of airline tickets and hotel and motel accommodation. Prices for apparel, footwear and accessories also fell.
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