Washington • A plunge in the cost of gas drove down a measure of U.S. consumer prices last month by the most since December 2008. Excluding the drop in fuel costs, prices were largely unchanged.
The consumer price index fell 0.4 percent in April from March, the Labor Department said Thursday. The main reason was that gas prices plunged 8.1 percent on average nationally.
For the 12 months that ended in April, overall prices rose 1.1 percent — the smallest year-over-year increase in 2½ years.
Excluding volatile energy and food costs, “core” prices ticked up 0.1 percent last month. Core prices have risen only 1.7 percent in the past 12 months. That’s just below the Federal Reserve’s 2 percent inflation target.
Scant inflation is allowing the Fed to continue its extraordinary efforts to stimulate the economy. Worries about lower inflation or even deflation might push the Fed to step up its low interest-rate policies to stimulate more borrowing and spending and push prices higher.
Deflation is a destabilizing cycle in which prices and wages fall steadily. It can slow economic growth.
Unusually low inflation means consumers can stretch their paychecks and buy more goods and services. But if it were to fall further, it could stoke fears of deflation.
A little inflation can be good for the economy, because it encourages businesses and consumers to spend before prices rise further.
Aside from sharp swings in gas prices, consumer and wholesale inflation has been mild this year. The combination of modest economic growth and high unemployment has kept wages from rising quickly. That’s made it harder for retailers and other firms to raise prices.
The average national price for a gallon has fallen since reaching a peak this year of $3.79 on Feb. 28. The average price was $3.60 a gallon on Thursday, according to AAA ($3.54 in Utah).
The Fed has said it will keep the short-term interest rate it controls near zero at least until the unemployment rate falls below 6.5 percent, as long as the inflation outlook remains mild.
It is also buying about $85 billion a month in Treasury and mortgage bonds to try to keep longer-term rates low. That’s intended to encourage borrowing and spending, which drives economic growth.
Many economists expect the Fed to begin to taper those purchases by the end of the year, particularly if hiring stays healthy. But too-low inflation could encourage the Fed to maintain or even step up the pace of its purchases.
Inflation slows along the Wasatch Front
Prices in the most populous part of Utah were largely unchanged in April, according to Zions Bank’s Wasatch Front Consumer Price Index.
The index of consumer prices increased just 0.1 percent from March on a nonseasonally adjusted basis. Falling utility bills offset gasoline and transportation prices, which rose for the third consecutive month, Zions said Thursday.
Utility costs fell 1.5 percent, mostly because of lowdemand for natural gas.
Transportation prices increased 0.9 percent, driven by a continued increase in the average price per gallon of gasoline. Gas prices in Utah have increased 21 percent since January, when they were among the lowest in the country but appear to have peaked just below the national average.
Prices increased for medical care and clothing. Both categories rose 0.2 percent. Education and communication each were down 0.3 percent.
Groceries dropped 0.2 percent, and housing was down 0.1 percent, Zions said.
Prices for other goods and services dropped 0.5 percent.