Consumer Prices Fall 0.3% in April

Consumer prices fell by 0.3% in April, the biggest decline in 18 months, led by a retreat in energy prices, the Labor Department said Friday.

The consumer price index is an important indicator of inflation. While this report showed inflation is not a problem for the economy, it could raise more concerns over whether the United States is heading down a path of a destabilizing fall in prices, the Associated Press reported.

In another report Friday, U.S. housing starts declined 6.8% to 1.63 million from the revised 1.748 million-unit clip in March, the Commerce Department said.

Home construction triggers demand for trucks to haul building materials as well as household goods after they are completed.

Labor’s report said that in additional to energy, prices for vehicles, clothes and food also declined in April.

Energy prices dropped 4.6%, as the war in Iraq came to an end, the report said. In March, energy prices, stoked by war tensions, rose by 4.6%.

Consumer prices had risen 0.3% in March. On Thursday, Labor said that wholesale prices fell by a record 1.9% in April. (Click here for the full story.)

These reports left economists predicting the Federal Reserve would be more likely to cut interest rates next month, AP said. The Fed previously said it was prepared to lower rates to ward off the threat of deflation, which is a prolonged and widespread decline in prices.

Meanwhile, Commerce said housing starts declined to the slowest pace in a year amid continuing job losses and poor weather.

The number of building permits issued, a gauge of future construction, rose 1.2% to a 1.708 million rate from 1.688 million the month before.

y region, starts dropped 7.1% in the Midwest, 1.3% in the Northeast to 152,000, 10.9% in the South and 0.7% in the West.

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