WASHINGTON (AP) — A sharp fall in the cost of gas drove a measure of U.S. consumer prices down last month by the most since December 2008. Outside the drop in fuel costs, prices were largely unchanged.
The consumer price index fell 0.4 percent in April from March, the Labor Department said Thursday. The main reason the index fell was gas prices plunging 8.1 percent.
For the 12 months that ended in April, overall prices rose 1.1 percent, the smallest annual gain in 2 /2 years.
Low inflation allows consumers to stretch their paychecks and buy more goods and services.
It also means the Federal Reserve can continue its extraordinary efforts to stimulate the economy. If there were signs that inflation was picking up, the Fed might be forced to raise interest rates.
Excluding volatile energy and food costs, core prices ticked up 0.1 percent last month. Rents and new and used cars rose. Airline fares and clothes fell.
Core prices have risen only 1.7 percent in the past 12 months. That’s just below the Fed’s 2 percent target. A little inflation can be good for the economy, because it encourages businesses and consumers to spend before prices rise further.
Aside from sharp swings in gas prices, consumer and wholesale inflation has been mild this year. The combination of modest economic growth and high unemployment has kept wages from rising quickly. That’s made it harder for retailers and other firms to raise prices.
The average national price for a gallon has fallen since reaching a peak this year of $3.79 on Feb. 28. The average price was $3.60 a gallon Thursday, according to AAA.
The Fed has said it will keep the short-term interest rate it controls at nearly zero at least until unemployment falls below 6.5 percent, as long as inflation remains mild.
It is also buying about $85 billion in Treasury securities and mortgage-backed bonds in an effort to keep longer-term interest rates low and spur more borrowing and spending. That’s intended to encourage more borrowing and spending, which drives economic growth.
Among other economic developments Thursday:
— U.S. builders broke ground on far fewer homes in April, one month after topping the 1 million mark for the first time since 2008. But applications for new construction reached a five-year peak, evidence that the housing revival will be sustained.
The Commerce Department said that builders started construction at a seasonally adjusted annual rate of 853,000 in April, a 16.5 percent drop from the March pace of 1.02 million.
Applications for building permits rose 14.3 percent to a rate of 1.02 million, the highest since June 2008.
Homebuilders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock-bottom mortgage rates and rising home values have boosted demand for new homes.
New construction of single-family homes reached an annual rate of 610,000 in April, down 2.1 percent from March, when single-family construction had fallen 4.4 percent.
Multifamily construction, which is volatile, plunged 39 percent in April to a rate of 243,000. That drop reversed a 26 percent surge in March.
— The number of Americans seeking unemployment aid rose 32,000 last week to a seasonally adjusted 360,000, the most since late March. The jump comes after applications fell to a five-year low.
The Labor Department said that the less volatile four-week average rose just 1,250 to 339,250, a level consistent with modest hiring.
Weekly applications are a proxy for layoffs. The big increase could mean companies are cutting more jobs, possibly because of steep government spending cuts that kicked in March 1. Labor officials said there were no special circumstances that caused the spike.
Applications tend to fluctuate sharply from week to week and economists typically focus more on the four-week average. That remains 9 percent lower than it was six months ago.