The American consumer prices fell most and further decreases are likely with the emerging outbreak of coronavirus, suppressing the demand for some goods and services, compensating for price rises in the scarcities arising from supply chain interference. With the country virtually standing still and the economy quickly contracted as state and local governments adopt tough measures in the control of COVID 19, the respiratory disease that caused the coronavirus.
“In the next few months, deflation is likely to take hold as businesses fall prices due to significantly lower demand due to the coronavirus outbreak and related movement constraints, with gasoline, hotel accommodation, clothing, and airline tickets falling by 0.4% last month. The Labor Department started on its consumer price index. Since January 2015, this has been the largest drop, and a 0.1% increase was achieved in February. The CPI increased by 1.5% in 12 months to March, following an increase of 2.3% in February”, said Gus Faucher, chief economist at PNC Financial in Pittsburgh.
There were shuttered up restaurants, bars, and other social venues. Apart from some manufacturers, clothing retailers were also shut down and the transport was drastically reduced to a minimum and millions of Americans were unemployed. Fear of a severe global recession and war between Saudi Arabia and Russia over oil prices has resulted in crude prices collapsing. The increase in prices due to supply chain bottlenecks is expected to be compensated.
The labor department said that data collection last month was also affected by a temporary close-out or limited operation of specific types of establishments, leading to an increase in the price that was considered for the time being unavailable and characterized by a large number of companies, with data collection suspended during a personal visit.
“Even as the Federal Reserve has taken exceptional measures to stop the free fall of the economy, the general price decline is anticipated. The disinflationary momentum and the great disruption of market activity in the fields of economic and financial markets are key causes for a large new monetary policy stimulus from the Federal Reserve”, added Gus Faucher.
After an increase of 1.7 percent in January, the core PCE (Price consumer expenditure) price index increased 1.8 percent year-on-year in February. In 2019, it underlined its goal. Economists expected inflation to be squeezed back last month, with some components in the producer price index report, feeding into the core PCE price decline in March. At the end of the month, core data on the PCE pricing index will be published. However, the closure of businesses could impact inflation data collection over the next few months and would make the reports untrustworthy.
The CPI (Consumer price Index) decreased by 0.1% in March, the first decrease since January 2010, except for volatile food and energy components. The core CPI increased by 0.2%. Also, the prices of new motor vehicles have dropped underlying inflation in March. The core CPI increased in march 2.1%, between 12 months and after increasing by 2.4% in February. The primary residence of the owner’s equivalent rent, which would be paid or rented by the home by the owner, has risen by 0.3%. In February, this increased by 0.2 percent. The cost of accommodation in a hotel and motel last month shrank record 7.7%. Last month, airline fares fell 12.6%, the greatest decrease in the recorded figure.
