U.S. consumer prices declined for the second-straight month in April, the Bureau of Labor Statistics reported on Tuesday. Prices fell by 0.8 percent on a seasonally adjusted basis in April, marking the largest drop since December 2008.
That’s an alarming drop, dragged down primarily by falling gasoline and energy prices. But excluding volatile food and energy, prices still fell by 0.4 percent. That’s the largest monthly decline in the so-called core consumer price index since the BLS began tracking the data in 1957.
Falling prices might sound like a good thing, but economists agree that deflation – the opposite of inflation – would be very bad news
Click here to read the whole story from Anneken Tappe on CNN Business.
When prices fall because people aren’t buying things, manufacturers sometimes can’t charge enough to make the product they’re trying to sell. That means they’ll stop making those products and lay off workers. That can start a vicious circle in which demand continues to fall as more people lose their jobs.
Deflation isn’t here yet – prices have risen 0.3 percent over the past 12 months. But if stay-at-home orders continue to plunge the economy into a massive downturn, lower prices could exacerbate the damage.