New York: Prices are tumbling in America as the coronavirus lockdown drags on and people spend less.
US consumer prices declined for the second-straight month in April, the Bureau of Labor Statistics reported on Tuesday. Prices fell by 0.8% on a seasonally adjusted basis in April, marking the largest drop since December 2008.
The collapse in gas prices was brought on by a demand crisis in the oil market, combined with an inopportune time for a major price war between Saudi Arabia and Russia.
It wasn’t the only area where prices dropped. Prices for apparel, car insurance, airline fares and lodging away from home helped drag the overall index down as demand for these goods and services disappeared.
Meanwhile, food prices climbed higher, with the food at home category recording its biggest increase since February 1974, rising 2.6%. The price index for eggs climbed more than 16% — the biggest increase for any food item.
Rents and medical costs increased slightly as well.
Falling prices, argue economists, cause deflation, which would be very bad news. When prices fall because people aren’t buying things, manufacturers sometimes can’t charge enough to make the product they’re trying to sell. That means they’ll stop making those products and lay off workers. That can start a vicious circle in which demand continues to fall as more people lose their jobs.