WASHINGTON (Reuters) - U.S. consumer prices dropped by the most since the Great Recession in April, weighed down by a plunge in demand for gasoline and services including airline travel as Americans stayed home during the coronavirus crisis.
The report from the Labor Department on Tuesday also showed a record decline in underlying prices last month, raising the specter of a bout of deflation as the economy sinks deeper into a recession triggered by lockdowns to slow the spread of COVID-19, the respiratory illness caused by the coronavirus.
The government reported last Friday that the economy lost 20.5 million jobs in April, the deepest plunge since the Great Depression. The economy contracted in the first quarter at it steepest pace since the 2007-09 downturn. Deflation, a decline in the general price level, is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.
“The economic collapse has taken a dangerous turn where now it is consumer prices that are being pulled down into the abyss as consumers sitting at home have postponed their purchases,” said Chris Rupkey, chief economist at MUFG in New York. “Part of the reason the Great Depression lingered so long was because consumers knew they could wait till next year to buy cars and refrigerators and homes at a cheaper discount.”
The consumer price index tumbled 0.8% last month after falling 0.4% in March. That was the largest decline since December 2008 when the economy was in the throes of a recession, and marked the second straight
