US economic figures spark fear

Further worrying US economic news fanned fears over the world’s biggest economy today as consumer inflation dropped into negative territory for the first time in more than 50 years.

The headline US consumer prices data showed a fall of 0.4% over the past 12 months – the first annual decline since August 1955.

Industrial production figures also caused concern, falling sharply in March to leave output down 12.8% year-on-year.

The news, coming after yesterday’s unexpectedly steep fall in US retail sales, hit investor sentiment on both sides of the Atlantic.

London’s FTSE 100 Index slumped by 1%, while the Dow Jones Industrial Average struggled to lift above the opening mark.

Experts said the figures were a sign that yesterday’s encouraging comments from US President Barack Obama and Federal Reserve chairman Ben Bernanke were a little optimistic.

Corporate news out in America also disappointed, with Burger King’s third-quarter revenues coming in below analyst estimates.

James Knightly, economist at ING Bank, said: “Fed chairman Ben Bernanke and President Obama’s ’tentative signs’ stabilisation speeches from yesterday are getting tested very early.

“Plunging corporate profits and rising unemployment are keeping households and businesses nervous with spending remaining under downward pressure.”

The fall in the consumer prices index will fuel worries over deflation as the recession puts pressure on demand and consumer spending, although the decline was largely as a result of the sharp fall in fuel and commodity prices compared with a year ago.

Meanwhile, the UK is suffering from persistent inflation as the weak pound forces consumer prices higher.

Retailers are hiking price tags to offset higher import costs, which last month pushed the official Consumer Prices Index measure up to 3.2%.