WASHINGTON — The larger-than-expected decline in March consumer prices reflected the recent sharp drop in gasoline prices but overall inflation excluding the more volatile items remained modest.

The March Consumer Price Index fell 0.2% after jumping 0.7% in February, and the core — excluding food and energy — advanced 0.1% for a 1.5% increase in overall CPI, and a 1.9% rise in the core index over the year.

Unrounded core was up 0.106%, right at a 0.1% increase and continued proof of prices being on the tame side. Many categories that had price increases in February saw declines last month.

Food prices were flat last month, after being up just 0.1% in February, as food at home fell 0.1%. Dairy fell 0.6%, fruits and vegetables dropped 0.4%, while nonalcoholic beverages declined 0.2%. Meats, poultry, fish and eggs index was unchanged in March.

Excluding food, CPI fell 0.2% in March.

Energy prices fell 2.6% in March after a sharp 5.4% increase in February, as the gasoline index fell 4.4%. AAA reported that prices were up in mid-March compared with a month earlier, but the increase was not nearly as sharp as in February. Fuel oil index fell by 2.1%. CPI excluding energy up just 0.1%.

In core, increase was held back by apparel (off 1.0%), household furnishings (down 0.3%), recreation fell 0.1% and tobacco dipped 0.2%. Gains were seen, however, in the shelter index up 0.2%; rent rose 0.2%, used cars & trucks added 1.2% — building on last month's 0.8% increase — and medical care grew 0.3%.

So after the slightly outsized increases in core CPI in the first two months of 2013 — likely due to start-of-year price gaps — it appears that prices have retrenched a bit, indicating that overall inflation continued to remain modest in the first few months of 2013.

In a separate report, real average hourly earnings reported up 0.2% in March, while real average weekly earnings rose 0.5%. On a year-over-year basis, real average hourly earnings up 0.3%.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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