Consumer prices fall 2% over the year

08.16.09
By Lewis Green

With so many consumers struggling to pay credit card debt, any news that prices are dropping is welcome and according to figures released Friday the Consumer Price Index fell 0.2 percent in July after increasing 0.7 percent in June.

The figures from the Department of Labor show that consumer prices have fallen 2.1 percent over the last 12 months, with much of that decline coming from the energy sector. According to the Labor Department, food prices increased 0.9 percent over the last year but a 28.1 percent decline in energy prices - bolstered mostly by gasoline and electricity - helped drop consumer prices for the year.

Although prices are down over the last year it doesn't appear to be resulting in an increase in spending for most consumers, who might be more interested in paying down credit card debt.

According to a recent PriceGrabber.com survey, 67 percent of consumers said they have cut back on spending because of the economy - up from 57 percent who said the same in January.

The accuracy of that survey seemed to be backed up this week as Wal-Mart reported flat earnings for the second quarter.

However, the Commerce Department said this week that it was encouraged by retail sales figures over the last three months, despite the fact that retail sales dropped slightly in July (0.1 percent). U.S. Commerce Secretary Gary Locke said he believes government initiatives are helping to smooth out the economy.

"Despite the slight decline in retail sales we remain encouraged that the Recovery Act and other economic initiatives have stabilized conditions and helped those harmed by the economic crisis," Locke said.

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American appear to be getting more for their money over the last year