Thursday, June 17, 2010

Consumer Prices Dip For Second Straight Month

For the second month in a row, American consumers are seeing lower prices on goods, energy bills, and other services. According to, earlier today the Labor Department reported that the Consumer Price Index dropped 0.2% in May, following a 0.1% decrease last month.

It marked the biggest decline since consumer prices plunged 0.7 percent in December 2008. That was a period when the worst recession since the 1930s stoked fears of deflation. The country didn't get stuck in a deflationary spiral then, and probably won't now, economists say.

Deflation is dangerous. It's a widespread and prolonged drop not only in the prices of goods at stores but also real estate, stocks and wages. America's last serious case of deflation was during the Great Depression of the 1930s.

Meanwhile, "core" consumer prices, which strip out volatile energy and food, edged up 0.1 percent in May, after being flat in April. That meant core prices are up only 0.9 percent over the past year - below the Fed's inflation target.

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