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Consumer Prices Fall 0.3 Pct., Core Flat

May 16, 2003
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WASHINGTON (Reuters) - A sharp drop in energy costs helped pull consumer prices down in April, but even without volatile energy costs prices were unchanged, the government said on Friday in a report likely to fan fears of deflation.

The Consumer Price Index, the most popular gauge of U.S. inflation, fell 0.3 percent last month, the Labor Department said. The so-called core CPI, which excludes volatile food and energy prices, was unchanged for the second consecutive month.

Economists polled by Reuters had expected the CPI to dip 0.1 percent, with the core index up 0.2 percent.

It was the first time since two back-to-back declines in late 1982 that the core CPI had not risen in any two-month period. Core inflation has slowed sharply so far this year, advancing at just a 0.6 percent annual rate after increasing 1.9 percent last year.

In the 12 months ended in April, the core CPI was up just 1.5 percent, its smallest 12-month advance since March 1966.

The Federal Reserve warned after a meeting last week that the economy faced a small risk of an "unwelcome substantial fall in inflation." Analysts had said any further sharp slowing would likely raise the odds the central bank would lower interest rates again to ward off any chance prices would fall for a sustained period.

Energy prices, which had risen sharply for three straight months, slid 4.6 percent in April, the biggest decline since November 2001. The price of gasoline fell 8.3 percent and fuel oil costs plummeted 14.9 percent, the sharpest drop since February 1990.

The tumble in energy prices reflected the drop in the cost of oil since late-February highs as concerns eased over the possibility of a war-related disruption in supplies.

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