Reflecting a steep drop in energy prices, the Labor Department released a report on Friday showing consumer prices in the U.S. fell by slightly more than anticipated in the month of March.
The Labor Department said its consumer price index slid by 0.4 percent in March after inching up by 0.1 percent for two straight months. Economists had expected consumer prices to fall by 0.3 percent.
The bigger than expected decrease, the largest monthly decline since January of 2015, came as energy prices plunged by 5.8 percent in March after slumping by 2.0 percent in February. Gasoline prices led the way lower, plummeting by 10.5 percent.
Excluding the steep drop in energy prices as well as an increase in food prices, core consumer prices edged down by 0.1 percent in March after rising by 0.2 percent for two consecutive months. Core prices were expected to inch up by 0.1 percent.
The unexpected dip in core prices, the first since January of 2010, reflected lower prices for airline fares, lodging away from home, apparel, and new vehicles.
Meanwhile, the Labor Department said prices for medical care, used cars and trucks, motor vehicle insurance, and education increased during the month.
The report said the annual rate of growth in consumer prices slowed considerably to 1.5 percent in March from 2.3 percent in February.
Core consumer prices were up by 2.1 percent year-over-year in March compared to the 2.4 percent increase in the previous month.
"The March consumer price report underscores that the fallout from the coronavirus has had a large disinflationary effect on prices due to the large demand shock, plunge in oil prices, and stronger dollar," said a note from economists at Oxford Economics.
They added, "The disinflationary impulse, along with the great disruption in economic and financial market activity, is a key reason why the Fed is unleashing vast new monetary policy stimulus."
On Thursday, the Labor Department released a separate report showing a modest decrease in U.S. producer prices in the month of March.
The Labor Department said its producer price index for final demand dipped by 0.2 percent in March after sliding by 0.6 percent in February. Economists had expected prices to drop by 0.4 percent.
Meanwhile, the report said core producer prices, which exclude food and energy prices, rose by 0.2 percent in March after slipping by 0.3 percent in February. Core prices were expected to show no change.
The annual rate of producer price growth slid to 0.7 percent in March from 1.3 percent in February, but the rate of core producer price growth was unchanged at 1.4 percent.