Analysts were caught somewhat off-guard on the news that consumer prices fell 0.1 percent in April. Although slight, this is the first decrease in the cost of living in more than a year. A move by retailers to cut prices in a bid to increase overall sales is likely responsible for the decrease.
While the economy is slowly gaining strength, there are still roadblocks on the horizon that could derail a recovery. Unemployment remains near 10 percent and concerns that the EU debt crisis could spread to other markets, has nervous consumers keeping a close eye on their spending.
“There simply isn’t any kind of price pressure of any consequence in the economy,” said David Resler, chief economist at Nomura Securities International Inc. in New York, who accurately forecast the decline in prices. “This puts the Fed firmly in place for the foreseeable future.”
Source: Bloomberg
