The Consumer Price index (CPI) has had its biggest drop in October; since the Labor Department began keeping monthly data in 1947. Newly constructed homes saw a new record low as well, underlined how rapidly the economy was weakening.
Breakdown:
· Labor Department
· Consumer Price Index Fell 1%
· Wall Street analysts forecasted 0.8% decline
· Core prices, excluding food and energy, declined 0.1% - Forecast showed a 0.1 increase.
“Analysts said earlier concern about inflation risks may soon be replaced by worry about deflation, which also has a corrosive effect on the economy’s performance.”
Breakdown: Home Starts
· New-home starts fell 4.5% in October to 791,000 units
· Building permits dropped 12% to 708,000
“It appears we are in a period of disinflation right now, where the actual level of inflation is trending lower,” said Michael Sheldon, chief market strategist for RDM Financial, Westport, Connecticut. “The question is will the economy rebound enough with the benefit of a big stimulus plan in 2009 to prevent deflation and get consumers spending again.”
In testimony on Capital Hill on Tuesday, Federal Reserve Chairman Ben Bernanke told Congress that the $700 billion bailout and other treasury facilities have started to ease credit markets, but what is at the core now, are declining home price. This is having a direct affect individual credit and their willingness and ability to spend.
Breakdown: Energy
· Prices dropped 8.6% in October,
· 3.1% in August
· 1.9% in September
· October saw biggest drop since recording started in 1957
· Gasoline prices plunged 14.2 percent in October
· Expected to drop again in November
· Retail gasoline at $2.13 a gallon in November,
· Sharply below the $3.54 a gallon in October.
“On a year-over-year basis, the Consumer Price Index rose 3.7 percent, the smallest increase in a year.”
Read Article: October consumer prices and home starts plummet










