WASHINGTON — Consumer prices have fallen more in the past year than in any 12-month period in nearly six decades — a huge break for shoppers but also a reminder that prices are being restrained by weak spending that’s likely to slow an economic recovery.
The recession and lower energy costs kept a lid on prices for July, causing consumer inflation to fall to zero. Most economists think prices are now in a sweet spot: ultra-low inflation without a serious risk of deflation — a destabilizing spiral of falling prices and wages.
“Right now, there is no inflation out there,” said David Wyss, chief economist at Standard & Poor’s in New York. “The big issue is still a lack of economic growth.”
Wall Street remained nervous Friday that recession-battered consumers could short-circuit any economic rebound after the Reuters/University of Michigan index of consumer sentiment posted a significant drop for the first part of August. It was a much weaker showing than expected.
In Friday’s report on consumer inflation, the Labor Department said prices were flat in July and have fallen 2.1 percent over the past 12 months — the steepest drop since a similar decline for the period ending in January 1950.
The 12-month decline reflects a 28.1 percent plunge in energy costs.
Core inflation, which excludes volatile energy and food prices, amounted to a skimpy 0.1 percent in July and 1.5 percent over the past 12 months — right in the Federal Reserve’s comfort zone.
