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U.S. consumer prices post first drop in 10 months on weak gasoline


U.S. consumer prices fell for the first time in 10 months in March, weighed down by a decline in the cost of gasoline, but underlying continued to firm amid rising prices for and rental accommodation.

The Labor Department said on Wednesday its Consumer Price Index slipped 0.1 percent last month, the first and largest drop since May 2017, after climbing 0.2 percent in February.

In the 12 month through March, the CPI increased 2.4 percent. That was the largest annual gain in a year and followed February's 2.2 percent increase. Annual is rising as the weak readings from last year drop from the calculation.

Excluding the and components, the CPI climbed 0.2 percent, matching February's increase. The so-called core CPI rose 2.1 percent year-on-year in March, the largest advance since February 2017, after increasing 1.8 percent in February. The core CPI is now well above the 1.8 percent annual average increase over the past 10 years.

Economists had forecast the CPI unchanged in March and the core CPI rising 0.2 percent. The soft headline monthly reading is likely to be temporary as a report on Tuesday showed prices rising solidly in March amid strong increases in and costs.

The Federal Reserve tracks a different index, the personal consumption expenditures price index excluding and energy, which has consistently run below the central bank's 2 percent target since mid-2012.

But with the labour market tightening, the dollar weakening and the stimulus from a $1.5 trillion income tax cut package and increased government spending still to impact on the economy, economists expect will breach its target sometime this year.

They argue that this scenario could compel the Fed to increase interest rates three more times this year. raised borrowing costs last month and forecast at least two more rate hikes in 2018.

Gasoline prices tumbled 4.9 percent in March, the largest drop since last May, after falling 0.9 percent in February. prices edged up 0.1 percent after being unchanged in February.

The core CPI was lifted by rising rents and costs. Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.3 percent last month after climbing 0.2 percent in February.

costs increased 0.4 percent, with prices for hospital care shooting up 0.6 percent and the cost of doctor visits rising 0.2 percent. Apparel prices fell 0.6 percent after two straight months of robust increases.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 11 2018. 18:42 IST