Cheaper energy and transportation prices helped keep overall consumer prices in check in February, the Labor Department said on Friday, a surprise after a period of run-ups that had heightened concern about inflation.
However, a separate survey showed that the mood of the U.S. consumer continued to weaken last month.
The department said its Consumer Price Index, the most widely used gauge of inflation, was flat last month after rising 0.4 percent in January.
Even more significantly, core consumer prices that exclude food and energy items were unchanged in February after climbing 0.3 percent a month earlier.
The tame price performance was sharply in contrast to Wall Street economists' forecasts that overall prices would climb by 0.3 percent and that core prices would be up 0.2 percent.
Federal Reserve policy-makers meet next Tuesday and are expected to cut interest rates again to try to boost a flagging economy.
The last time overall consumer prices were unchanged was in August 2007.
The CPI report showed energy prices fell 0.5 percent in February, a sharp reversal from January's 0.7 percent gain and the first decline since last August. Transportation prices were down 0.7 percent following a 0.5 percent December gain.
In the 12-month period through February, consumer prices rose 4 percent, a moderation from the 4.3 percent gain registered in January and the smallest year-over-year increase since last October, according to department officials.
Consumer Confidence Dips
The surveys' index of confidence slipped to 70.5 in early March from the final February reading of 70.8. Economists polled by Reuters had predicted a lower figure of 69.0.
"There was nearly unanimous agreement among consumers that the economy was now in recession," said Richard Curtin, director of the survey, in a statement.
Consumers' view of inflation one year ahead, at 4.5 percent, was up sharply from February's 3.6 percent. Other than for the month after Hurricane Katrina in the fall of 2005, the latest 1-year inflation reading was the highest since the 1990 recession, according to Curtin.