WORLD> America
US October wholesale prices plunge record 2.8%
(Agencies)
Updated: 2008-11-18 23:40

WASHINGTON -- Wholesale prices in the United States plunged a record amount in October as energy prices fell by the largest amount in 22 years.


In this Nov. 12, 2008 photo, the sign in front of a Seven Eleven store in Independence, Mo. shows the price of one gallon of unleaded regular gasoline to be $1.69.9. [Agencies]

The Labor Department reported Tuesday that wholesale prices dropped by 2.8 percent in October, the biggest one-month decline on records that go back more than 60 years. The previous record holder was a 1.6 percent fall in October 2001, the month after the terrorist attacks.

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The overall decline in the department's Producer Price Index was bigger than the 1.8 percent drop analysts had expected. However, core inflation, which excludes energy and food, was not as well-behaved, rising by a bigger-than-expected 0.4 percent.

The 0.4 percent rise in core inflation did not alter the view that plunging energy prices and a sharply slowing economy were combining to slash inflation pressures.

Analysts said much of the jump in core prices reflected the lingering impact of the huge rise in energy costs earlier in the year and should retreat in coming months as those costs continue to fall.

Ian Shepherdson, chief US economist at High Frequency Economics, predicted that core wholesale prices would retreat significantly in coming months.

The 2.8 percent overall decrease marked the third straight month that wholesale prices have fallen.

Many economists believe the economy has fallen into a recession that could be the worst downturn in more than two decades. The expectation is falling inflation pressures will give the Federal Reserve room to cut interest rates further to combat the downturn.

The Fed cut interest rates by a half-point in a coordinated move with other central banks on Oct. 8 when the turmoil in financial markets was gaining intensity and followed with another half-point reduction on Oct. 29.

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