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Huge fall in US Consumer Price Index

The American Consumer Price Index (CPI) fell by 1.3% over the past year, its largest yearly fall since 1950.

The index, which is a gauge of the cost of living in the country provided by the Bureau of Labor Statistics, was mainly impacted by a collapse in energy prices, which have fallen by 27.3% over 12 months to the end of May. Transportation was also a major drag on the index, falling 14.3% over the period.

Despite the overall falls, the shelter, new and used motor vehicles, and medical care indices all posted increases over May. There was more bad news for the American housing market, however, which saw a third consecutive monthly decline of 0.1%, although over the year the housing index is up 2.7%.

Higher commodity prices could compound problems for American companies as already weak sales mean they will struggle to pass on higher production costs to consumers.

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