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Gasoline prices keep inflation tame, push confidence to 4-year high

May 12, 2012|By Tiffany Hsu, Los Angeles Times

Falling energy and gasoline prices helped keep inflation in check last month and also pushed consumer confidence to a four-year high, according to two reports.

An index of prices paid by factories, farms and other producers fell 0.2% in April from the previous month, the Labor Department said Friday. It was the first drop of the year and the most substantial one since October.

Prices were 1.9% higher compared with April 2011, but represented seven consecutive months of slower increases after surging 7% in September.

The slide in April from March was almost entirely because of a 1.4% drop in energy prices — the largest tumble in six months. Without considering volatile food and energy prices, which soared earlier this year, the index was up 0.2%.

Cheaper gas also helped boost consumer confidence in May to its highest level in four years. A preliminary index compiled by Thomson Reuters and the University of Michigan climbed to 77.8 from last month's 76.4, reaching a point not seen since January 2008. It was the ninth straight monthly rise.

However, Americans are a bit wary about what the next six months hold. An index of expectations backed off a three-year high. But at least people are feeling better about the state of the housing market, which analysts believe could lead to higher home sales this year.

Mild inflation is likely to help the Federal Reserve maintain its plans to keep short-term interest rates at record lows through most of 2014.

tiffany.hsu@latimes.com

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