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NEW YORK: In another sign that the struggling U.S. economy continues to slow, consumer prices tumbled by a record amount in October, carried lower by skidding energy and transportation prices.
The consumer price index, a key measure of how much Americans spend on groceries, clothing, entertainment and other goods and services, fell by 1 percent from September to October, the Labor Department reported early Wednesday. It was the steepest single-month drop in the 61-year history of the pricing survey.
“It's funny that just a few months ago everyone was wringing their hands over inflation,” said Nariman Behravesh, chief economist at Global Insights. “It's gone. It's over.”
Energy prices led the decline, falling by 8.6 percent in October as the price of gasoline continued its steady slide from highs of more than $4 a gallon. The costs of transportation fell by 5.4 percent while clothing prices fell 1 percent.
“The dominant and common factor is the plunge in gasoline prices, which drove the bulk of the weakness,” said James O'Sullivan, U.S. economist at UBS. “You're going to see huge declines in a month's time in the November reports. That's the biggest part of the weakness.”
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Even excluding volatile food and energy prices, the core consumer price dropped 0.1 percent in October. It was the first such decline in more than two decades and raises the specter of deflation as the economy contracts and demand for goods and services across the board plunges.
“This month it's more than slowing, it's outright contraction,” O'Sullivan said. “And yes, if you extrapolate that, it's deflation.”
O'Sullivan added that he expects core prices, which are up 2.2 percent in 2008, to continue to fall back, but he does not expect them to slip into negative territory.
The fall in consumer prices was just the latest symptom of an ailing economy. On Tuesday, the government reported that wholesale prices dropped a record 2.8 percent last month as commodities prices fell through the basement on slumping worldwide demand. Crude oil prices, which peaked near $150 a barrel this summer, are now hovering at $55 a barrel, and the prices for gold, silver and other metals have collapsed.
Two recent reports from the beleaguered housing market, ground zero of America's financial and economic woes, offered more gloom.
Housing starts fell 4.5 percent in October to 791,000, the government reported Wednesday. And the National Association of Home Builders reported that builder confidence in the market for new homes plunged in November.