US consumer prices see first drop in 13 months

| May 19, 2010 | 0 Comments

Official data has today revealed that US consumer prices fell in April by 0.1% on a monthly basis - the first decline in 13 months.

The fall was attributed to declines in petrol, housing, car and clothing prices according to the Labor Department.

Petrol prices fell by 2.4%, clothing costs fell 0.7%, while food costs rose 0.2%.

The figures came a surprise to analysts, who had forecast a 0.1% increase.

Meanwhile, on an annual basis, inflation rose by 0.9% - the lowest growth rate since January 1966.

The figures suggest that the US central bank, the Federal Reserve, will keep interest rates at the low rate of between 0% and 0.25%.

According to Paul Ashworth, senior US economist at Capital Economics, the Fed is not expected to start raising interest rates until 2011, but it is possible that the first rise will not be seen until 2012.

In related news, yesterday the Commerce Department revealed US housing starts soared in April, boosted by the expiration of a Government tax credit, which ended last month.

According to the Commerce Department, construction of new US homes rose 5.8% in the month to a seasonally adjusted annual rate of 672,000 properties – the highest since October 2008.

Furthermore, the figure was 40.9% higher than in April last year.

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