Consumer prices drop unexpectedly

The cost of living in the United States unexpectedly dropped in April for the first time in more than a year, signaling the world’s largest economy is recovering without causing prices to flare.
The 0.1 percent fall in the consumer price index was the first decrease since March 2009, figures from the Labor Department showed last week. Excluding food and fuel, the so-called core rate was unchanged, capping the smallest 12-month gain in four decades.
Retailers such as Wal-Mart Stores Inc. are cutting prices to bolster sales as customers face almost 10 percent unemployment and rising foreclosures. The lack of inflation, which may be reined in even more by the European debt crisis, is one reason Federal Reserve policymakers have pledged to keep the benchmark interest rate near zero in coming months.
“The massive slack in labor and other resource markets has sucked all the pricing power out of the economy,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pa., said before the report.
Consumer prices were forecast to rise 0.1 percent, according to the median forecast of 79 economists in a Bloomberg News survey. &#8226