US prices drop for first time since 1955

Prices in the US fell in the year to March, marking the first annual decline since 1955 and easing fears that aggressive government stimulus measures could kick-start inflation.

The drop in prices could ease pressure on consumers who have seen their wealth savaged by the economic downturn, but companies remain under severe pressure to cope with eroding demand.

Official figures revealed separately yesterday showed industrial production plunging 12.8 per cent in the year to March while manufacturing output fell at the fastest rate since the end of the second world war.

Consumer prices were down by 0.4 per cent year-on-year, the labour department said yesterday. Last month prices fell 0.1 per cent owing to weak energy and food prices following two months of increases.

The monthly figure trailed the 0.1 per cent rise economists had expected and compared with a 0.4 per cent increase in February.

The drop in prices could renew fears of deflation, which were stoked after prices were flat or declined during the final five months of 2008. As the economic recession deepened in the second half of last year companies slashed prices to clear stocks.