The Department of Labor’s Bureau of Labor Statistics reported a 0.3% decline in the Consumer Price Index in July, the first monthly decline since April 2000, and it was led by plummeting energy prices. The bureau reported that the energy index was down 5.6%, the largest drop since April 1986.

The index for petroleum-based energy declined 10.3% and the index for energy services fell 1.0%. The index for energy, which registered double-digit increases in both 1999 and 2000, declined at a 0.7% seasonally adjusted annual rate during the first seven months of 2001.

Meanwhile, the Labor Department said declines in the indexes for fuel oil and for natural gas — down 2.8 and 4.1%, respectively — more than offset a 0.6% increase in the index for electricity. Electricity prices were up just 0.3% in July, after soaring a record 3.8% in June. Electricity prices were 9% higher this July than last.

Excluding volatile food and energy prices, the “core” CPI rose only 0.2% following a 0.3% increase in June. The declining CPI number suggests inflation is being held in check, which could prompt the Federal Reserve Board to cut interest rates as a result at its meeting this week. The Reserve said last week that manufacturing activity was flat in July, the first time it has not slipped in 10 months.

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