U.S. consumer prices unchanged in April on seasonally adjusted basis, rose 0.2% excluding food and energy; prices have risen 2.3% over last 12 months, the smallest increase in more than a year

Cindy Allen

WASHINGTON , May 15, 2012 (Associated Press) – U.S. consumer prices were flat last month as cheaper gas offset modest increases for food, clothing and housing. The data indicate that inflation remains in check.

The Labor Department said Tuesday that the seasonally adjusted consumer price index was unchanged in April, after a 0.3 percent gain in March. Excluding volatile food and gas costs, so-called "core" prices rose 0.2 percent. That was the same as in March.

Over the past 12 months, prices have risen 2.3 percent. It's the smallest increase in more than a year. Core prices are also up 2.3 percent in the past year, close to the Federal Reserve's inflation target of 2 percent.

Mild price increases leave consumers with more money to spend, which tends to boost economic growth. Lower inflation also gives the Fed more leeway to keep interest rates low in its effort to encourage borrowing and energize the economy.

"We see little in the way of ... significant inflation pressures," said Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage.

Gas prices fell 2.6 percent in April, the biggest decline in six months. Food and housing prices both ticked up 0.2 percent.

Inflation has eased since last fall, outside of a spike in gas prices earlier this year. But gas prices appear to have peaked in April and have since fallen.

The national average fell to $3.73 a gallon on Tuesday, roughly 18 cents cheaper than a month ago, according to a survey by AAA.

Still, Americans' pay is lagging. Their average hourly earnings have risen just 1.3 percent in the past 12 months. Adjusted for inflation, average pay declined 0.5 percent from April 2011 to April 2012.

Food prices rose 0.2 percent last month, a slower pace than earlier this year. Fruit and vegetable prices jumped 1 percent, the most since July. Baked goods, seafood and eggs also grew more expensive in April. But dairy products dropped 1 percent, the most in three years.

The cost of airfares, cars and clothing all rose in April. But some entertainment costs fell. The average price of televisions dropped 3.7 percent, the most in more than two years. Toy prices also tumbled.

Without more jobs or higher pay, consumers might be forced to cut back on spending later this year. Consumer spending is critical because it accounts for 70 percent of economic activity.

A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.

The Fed last month reiterated that it planned to keep its key interest rate at a record low through at least late 2014. That's not likely to change when the Fed next meets on June 19-20.

The Fed acknowledged that rising energy prices have boosted inflation. But Fed Chairman Ben Bernanke contends that the boost in inflation should be temporary and will recede as energy prices retreat.

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