US prices down as crisis bites

By Bob Willis  |   2008-11-17  |     NEWSPAPER EDITION

THE cost of living in the United States probably fell in October by the most in almost 60 years, while manufacturing and homebuilding sank deeper into a recession, economists said before reports this week.

Consumer prices probably dropped 0.8 percent last month, the most since 1949, according to the median estimate in a Bloomberg News survey. Builders broke ground on the fewest houses in at least a half century and factory output weakened further, other reports may show.

Commodity costs plunged in October when the economy, which descended last quarter, went into free fall as credit and financial markets collapsed. Slumping sales are forcing retailers to lower prices, giving the Federal Reserve scope to keep cutting interest rates to limit the damage.

The Labor Department's consumer-price report is due on Wednesday. Fuel, clothing and auto costs probably dropped last month as sales at US retailers fell 2.8 percent, the most since records began in 1992, economists said.

The slump in crude oil is feeding through to prices at the pump where the average cost of a gallon of regular gasoline plunged 17 percent last month to US$3.08.

Core prices, which exclude food and energy, rose 0.2 percent last month after a 0.1-percent gain the prior month, according to the survey median.

A report from the Labor Department tomorrow may foreshadow the drop in retail costs. Wholesale prices fell 1.8 percent last month, the most since records began in 1947, according to economists surveyed.

Shutdowns

As sales fall, manufacturers are cutting output and firing workers. Ford plans temporary shutdowns at nine North American plants this quarter after an 18-percent drop in US sales this year, the car maker said last week.