Business & Economy

US prices show biggest drop since 2008 in April due to pandemic

By Alfonso Fernandez

Washington, May 12 (efe-epa).- The falloff in consumer demand due to the coronavirus pandemic has caused the US consumer price index to plunge by 0.8 percent in April, the largest monthly drop since 2008, and the pace of inflation over the past 12 months slowed to 0.3 percent last month, down from 1.5 percent in March and 2.5 percent at the start of this year.

The inflation indicator released on Tuesday by the US Department of Labor shows how the US economy has virtually come to a halt amid the Covid-19 health emergency.

If one excludes the prices of food and fuel, which are the most volatile areas, underlying inflation in April fell by 0.4 percent, the most abrupt drop since 1957.

The yearly increase in the so-called core inflation rate dropped to 1.4 percent from its previous level of 2.1 percent, the lowest rate since 2011.

The biggest price drop was in gasoline, which plunged by 20.6 percent, although prices for other goods and services such as clothing, air tickets and auto insurance also registered sharp declines.

Meanwhile, food prices rose by 1.5 percent, while the figure for foods consumed at home rose 2.6 percent last month, the largest hike since 1974 due to the fact that Americans opted to buy and store food products.

Some foods, such as those affected by the closures of meat processing plants, rose by a noteworthy amount, with pork prices climbing 6.8 percent, veal by 7.5 percent and chicken by 6.3 percent.

The fall in consumer prices overall, however, reflects the shutdown in US economic activity due to home confinement orders, the closing of non-essental businesses and movement restrictions implemented to limit the spread of the coronavirus.

To alleviate the economic impact, the Federal Reserve employed its full arsenal of monetary tools, making massive injections of liquidity into the financial markets, purchasing huge amounts of debt and lowering interest rates practically to zero, while Congress approved several fiscal stimulus programs valued at some $3 trillion.

Fed Chairman Jerome Powell had said in late April that the US central bank was in no hurry to relax or halt its monetary stimulus measures and would wait until it was sure that the economy is on the road to recovery before making any changes in its policy.

The virus has had an impact on the economy unprecedented in recent times, according to the preliminary indicators that have been made public.

The initial calculation during the first quarter of 2020 was that the GDP contracted by 4.8 percent, but the figure for the second quarter is expected to be much more dramatic.

Unemployment shot up in April by 10.3 percent to 14.7 percent as a result of the wave of layoffs.

Meanwhile, President Donald Trump is anxious to reopen the US economy although medical experts are advising caution and saying that lifting quarantine restrictions should not be done hastily.

The US continues to be the world epicenter for the coronavirus pandemic with 1.3 million confirmed cases and more than 80,000 deaths, according to the unofficial running tally being kept by The Johns Hopkins University.

EFE

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