U.S. yearly inflation dropped for the first time since 1955 as falling transportation and energy costs pushed down consumer prices, according to new numbers released Wednesday.

The U.S. Department of Labour said that the consumer price index in March posted its first 12-month decline — 0.4 per cent — since Dwight D. Eisenhower was president.

The number compared the CPI level in March 2009 with the same indicator in the same month one year earlier.

Gauging prices between the end of December 2007 and the last day of the last month of 2008, U.S. CPI inched up ever so slightly, one-tenth of a percentage point.

March versus February

Measuring the national price level against February's CPI, the popular comparator, March's indicator slipped by 0.1 per cent.

Washington said the big factor driving down consumer costs was slumping energy prices, especially at the gas pump.

The energy subindex fell three per cent in March after rising 3.3 per cent in February.

For December 2008 to December 2007, energy prices — even with crude oil costs peaking in July 2008 — plunged 21 per cent.

In March, transportation prices, also affected by lower fuel prices, fell 1.1 per cent versus February.

Weak inflation, weak economy

Economists generally dislike inflation as distortionary. In the current economic slump, however, analysts now eye the dropping CPI level as a sign of slack demand for American goods and services.

Recently, however, some signs began pointing towards an economy that had at last reached bottom.

For the first three months of 2009, for example, the U.S. CPI — which measures the prices of a basket of goods and services people own or use — rose 2.2 per cent with energy costs up 7.9 per cent for the first quarter of the year.

Still, many economists are unwilling to call it the beginning of a recovery.

"We see the recovery as being different in both character (less diversified) and strength (weaker) relative to past recoveries. Therefore, we believe the recovery will be disappointing to both citizens and policymakers," said Wachovia Economics Group in an April commentary.

Already in April, U.S. retail sales fell unexpectedly by 1.1 per cent and the U.S. producer price index — what goods makers received for their wares — slipped by 1.2 per cent.

Both indicators pointed to a falling economy in the view of many analysts.

Different measures

Not all industrialized economies compute their national CPIs in the same way. Especially problematic is the treatment of shelter costs, which some countries omit from their calculations altogether, the Labour Department said.

The mathematical differences between countries can make comparing their CPIs difficult, the agency said.

"Over the 1997-2007 period the U.S. CPI-U increased faster than the CPIs of 16 of the other 29 OECD nations, and faster than the CPIs of all of the other G7 nations, including Canada, the United States' largest trading partner," the Labour Department said in a press release.

Historical costs

Interestingly, Washington uses 1982 as the base year for the national CPI. Comparing the index in March 2009, consumer prices have risen 112 per cent in 26 years.

American inflation records track back all the way to January 1913. The March price level is 20 times higher than what it was 95 years earlier.