Consumer Prices Fell Unexpectedly in March

Washington, DC, April 15, 2009--Consumer prices in the U.S. unexpectedly fell in March, underscoring Federal Reserve forecasts that prices will be contained in coming months.

The consumer price index decreased 0.1 percent compared with a 0.1 percent gain projected by economists.

In the 12 months ended March, prices fell 0.4 percent, the first decline since 1955.

Companies from General Motors Corp. to Macy’s Inc. are using incentives and promotions to draw customers as Americans contend with the biggest job losses in the post World War II era and shrinking wealth.

Some Fed policy makers are concerned the price deceleration will give way to deflation, or a broad, prolonged drop that hurts economic growth.

Declining food and fuel costs brought overall prices lower. Energy costs dropped 3 percent, led by decreases in fuel oil and gasoline. Food expenses dropped 0.1 percent on lower costs for dairy and meat products.

Over 60 percent of the gain in core prices was caused by an 11 percent surge in the cost of tobacco and smoking products, the report said. Drug and tobacco makers often try to pass along rising raw material costs early in the year, economists said.

The other gainer was new vehicles, which cost 0.6 percent more. Air fares, clothing and hotel rates were among the categories that dropped in price.