Deflation influenced by oil price drop, expert suggests

16/04/2009

The dip in oil prices has been cited as one of the main reasons for deflation to have hit the US for the first time in over half a century.

Figures from the country's labour department showed that consumer prices fell by 0.4 per cent in March, compared to the same month in 2008.

It represents the first decline since 1955, with reduced heating oil and energy bills considered to be a factor.

Oil prices reached a record high last summer before collapsing to a level around $100 below the peak.

And David Buik, market analyst at BGC Partners in London, suggested that this means widespread deflation is unlikely to take hold.

"With oil prices now stable at close to $50 a barrel, there is no near-term prospect of a further substantial decline in energy prices," he said.

Ben Westmore, energy analyst at the National Australia Bank in Melbourne, recently told the Associated Press that faltering demand means oil prices are unlikely to see significant increases in the near future.