WASHINGTON (AFP) — US consumer prices were flat in September as the credit crisis and falling energy costs curbed inflation, government data showed Thursday.
The Labor Department's consumer price index (CPI) showed a second consecutive tame reading after a 0.1 percent decline in August.
The reading compared with analyst forecasts for a 0.1 percent rise in prices.
The co-called core index which excludes food and energy showed a 0.1 percent increase after a 0.2 percent rise in August.
Over the past 12 months, consumer prices have risen 4.9 percent overall and 2.5 percent excluding food and energy.
A major factor in the report was a 1.9 percent drop in overall energy costs, reflecting the sharp drop in crude oil from record highs hit in July.
Food costs however rose 0.6 percent while housing and apparel prices each fell 0.1 percent.
Ian Shepherdson, chief US economist at High Frequency Economics, said inflation is rapidly fading as prices plummet in the face of weak economic conditions.
He said that gasoline prices fell a modest 0.6 percent in September "but it is already clear October gas prices will plunge; our current forecast is for a massive 18 percent drop."
"Food prices continue to trend strongly upwards, with a 0.6 percent September gain. But with global food prices having dropped sharply in recent weeks, there should be some relief over the next few months," Shepherdson said.
Many analysts say the surge in inflation earlier this year, which raised fears of stagflation, has now faded in the face of economic blows from a global credit crisis.
The Federal Reserve earlier this month cut its base rate a half-point to 1.5 percent, reversing its posture leaning toward a rate hike to curb inflation earlier in the year.
Some say the Fed may have to cut rates further to jump-start a moribund economy that will push prices down further.
"The combination of rising unemployment, restrained household spending and weak industrial production are a toxic mix for inflation," said Joseph LaVorgna, economist at Deutsche Bank.
"As these conditions worsen in the coming months -- as we believe they will -- price pressures will face significant downdrafts."
Copyright © 2009 AFP. All rights reserved. More »
