Consumer prices see steep drop in April

Drop in economic activity pushes prices down across the economy

It was the biggest month-tomonth fall since the 2008financial crisis, driven by a plunge in gasoline prices.

WASHINGTON » The economic paralysis caused by the coronavirus led in April to the steepest monthto-month fall in U.S. consumer prices since the 2008 financial crisis — a 0.8% drop that was driven by a plunge in gasoline prices.

And excluding the normally volatile categories of food and energy, so-called core prices tumbled 0.4%, the government said Tuesday in its monthly report on consumer inflation. That was the sharpest such drop on records dating to 1957.

The business shutdowns, reduced travel and shrunken consumer spending that the virus has caused have likely sent the U.S. economy into a severe recession. The resulting drop in economic activity is exerting a powerful downward force on prices throughout the economy.

Tuesday’s report raises the prospect of deflation, a prolonged drop in prices and wages that typically makes people and companies reluctant to spend and can prolong a recession. Not since the Great Depression of the 1930s has deflation posed a serious economic threat in the United States.

“If deflation becomes embedded in the economy, it can be difficult to uproot,” said Gus Faucher, chief economist at PNC Financial

Services. “Aggressive Fed actions can help prevent deflation from taking hold, supporting a stronger economy over the longer run.”

Over the past 12 months, overall prices have now risen a scant 0.3%, the smallest year-over-year increase since 2015. Core inflation has increased 1.4%, the lowest pace since 2011.