November 19, 2008
Led by falling gasoline prices, the government's Consumer Price Index
plunged a record one percent in October. It was the largest one month
decline in prices since the U.S. Labor Department began keeping
records in 1947.
Other prices were also softer as the economy appeared to slam on the brakes amidst the onset of the credit crunch. But it was the dramatic drop in gas prices at the pump that made the biggest difference for consumers in October.
Excluding food and energy prices from the mix, consumer costs were down just 0.1 percent. Energy prices paid by consumers plunged 8.6 percent in October on the heels of a 1.9 percent decline in September and a 3.1 percent drop in August. Gas prices peaked in mid July.
Food costs were up 0.3 percent in October, cutting in half the 0.6 percent rise posted in September. On a 12-month basis, the CPI rose 3.7 percent, which is the smallest increase in a year.
Going forward consumers can likely look forward to more falling prices. On Tuesday the government reported that prices at the wholesale level dropped by a record 2.8 percent in October, mostly because of the steep decline in oil prices.
Other commodity prices were also sharply lower as the world economy showed signs of slowing down too. Even food prices, which has skyrocketed earlier in the year, appeared to level off a bit.
Joel Naroff, chief economist for Naroff Economic Advisors in Holland, Pa., says he expects prices may continue to ease in the months ahead.
"The benefit of a major recession is that any worries about inflation tend to disappear and that is becoming the case," Naroff said.
