US core consumer prices post record drop in April as coronavirus lockdowns slam demand

• US core consumer price index, which excludes food and fuel costs, fell 0.4% in April, the largest monthly drop since 1957, according to a Tuesday report from the Labor Department.
• Overall US CPI fell 0.8% in April, the largest monthly drop since December 2008.
• Going forward, the indicator will be watched as falling prices over a sustained period could spark deflation, which would likely delay any economic recovery from the coronavirus pandemic.
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A key measure of US consumer prices dropped by a record amount in April as coronavirus-induced lockdowns cratered demand.

The core consumer-price-index fell 0.4% in April, following a 0.1% decline in March, according to a Tuesday report from the Labor Department. It's the largest monthly drop for the measure — which excludes food and fuel costs — since 1957, when the series began. The index rose 1.4% from last April, the smallest year-over-year increase since 2011.

Including the volatile costs of food and fuel, US CPI fell 0.8% in April, the largest monthly drop since December 2008. The measure was weighed down by gasoline prices, which plunged 20.6% during the month. On the flip side, the cost of food at home surged 2.6% as Americans boosted grocery shopping during the coronavirus pandemic.

April CPI is the latest in a long — and growing — list of economic indicators that have posted record declines amid the historic coronavirus pandemic. Going forward, the indicator will be watched as falling prices over a sustained period could spark deflation, which would likely delay any economic recovery.

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"The big question is what could lie ahead—while today's numbers reflect a severe period of deflation it's only a matter of time for the effects of massive fiscal stimulus to take hold in the form of inflation once consumers are back on their feet and demand rebounds," said Mike Loewengart, managing director of investment strategy at E-Trade.

Annual consumer inflation slowed to 0.3%, the smallest jump since 2015. The apparel index slumped 4.7% in April, motor vehicle insurance declined 7.2%, and airline fares decreased 15.2%, the largest monthly declines for the history of each index.

The energy index also fell 10.1% in April, its largest monthly decline since November 2008.

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