Underlying US inflation plunged to a 37-year low in April, data showed today, ramping up deflation fears in the stubbornly sluggish postwar economy.
Core consumer prices, which strip away volatile food and energy prices, rose just 1.5 per cent when compared to April 2002 - the smallest annual increase since March 1966.
Overall, sliding energy costs meant consumer prices fell by an 18-month record 0.3 per cent in April from the previous month, leading to 2.2-per cent inflation rate over the year.
The Federal Reserve raised the deflation spectre this month, warning the risk of downward pressure on prices, though small, was now was greater than the risk of inflation.
Deflation, or falling prices, deals a double blow to economies by pressuring people to postpone buying until prices fall further and by raising real interest rates.
It is also very difficult to reverse. The slumping US dollar, which reached a four-year low against the euro in the past week, may yet come to the rescue.
US industry operated at just 74.4 per cent of total capacity in April, the lowest level in 20 years, the Federal Reserve said in a report the previous day.
A breakdown of the April data showed monthly energy prices fell 4.6 per cent, led by a 13-year record 14.9-per cent plunge in fuel oil prices, an 8.3-per cent drop in gasoline prices and a 3.8-per cent decline in natural gas prices. Food prices fell 0.1 per cent.
AFP