US consumer prices dropped in May for the third straight month as the coronavirus pandemic pushed the American economy into a recession.
The Labor Department said Wednesday that its consumer price index fell 0.1 per cent last month after tumbling 0.8 per cent in April and 0.4 per cent in March. Excluding food and energy prices, which bounce around from month to month, so-called core inflation fell 0.1 per cent, tumbling for the third consecutive month for the first time ever.
The pandemic and the quarantines meant to contain it pushed the US economy into a severe recession in February, ending a record-breaking expansion that began in June 2009, a panel of economists declared Monday. Weaker demand from customers pushes prices down.
Overall, the initial impact of the shutdowns due to the novel coronavirus is deflationary," Contingent Macro Advisors wrote in a research note. Going forward, expect increased volatility in the coming months -- but the medium-term risks to inflation remain firmly to the downside.' Over the past year, consumer prices are up 0.1 per cent and core prices are up 1.2 per cent.
Gasoline prices dropped 3.5 per cent in May, their fifth straight decrease, and are down 33.8 per cent over the past year. Clothing prices fell 2.3 per cent, third straight drop, and are down 7.9 per cent over the past year.
Food prices rose 0.7 per cent last month, and the price of housing rose 0.2 per cent. The Federal Reserve seeks to keep inflation running at a 2 per cent annual pace. To prevent the economy from imploding completely, the Fed has slashed the short-term interest rate it controls to zero and poured trillions of dollars into the financial system. It has signalled that it stands ready to do more but is not expected to take further action at its latest meeting, which ends Wednesday.
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