Consumer prices fell by 0.3 percent in October, reflecting record drop in natural gas, cheaper gasoline
Friday, November 16th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Consumer prices fell by 0.3 percent in October, reflecting a record drop in the price of natural gas and sharply lower costs for gasoline.
The latest reading of the Consumer Price Index, a key inflation measure, marked the best showing in three months and came after prices jumped by 0.4 percent in September, the Labor Department reported Friday.
The decline in consumer prices highlighted one of the few benefits a weakening economy can provide.
Excluding energy and food prices, which can jump around a lot from month to month, the ``core'' rate of inflation rose by 0.2 percent in October, the fourth monthly increase of that size.
Analysts say consumers should find plenty of bargains as the holiday shopping season opens _ and for months to come if demand slumps.
With inflation under wraps, the Federal Reserve will have leeway to cut interest rates again to jump-start economic growth, analysts say. The Fed cut rates 10 times this year and some economists are predicting an 11th rate cut at the Fed's final meeting of this year on Dec. 11.
The economy shrank at a 0.4 percent rate in the third quarter and many analysts are predicting a bigger decline in the current quarter, thus meeting a common definition of recession: two consecutive quarters of declining economic ouput. An economy in recession will put a lid on prices.
So far this year, consumer prices have risen at an annual rate of 2.1 percent, compared with a 3.4 percent advance for all of 2000. The moderation reflects sharply lower prices for energy products. Energy prices, which rose by double digits in 1999 and 2000, declined at a rate of 7.2 percent over the last 10 months.
The drop in consumer prices in October was led by a 6.3 percent decline in energy prices, the largest decrease since March 1986.
Natural gas prices, which had soared because of short supplies last winter, fell by a record 6.8 percent in October, the biggest drop since the government began tracking these prices in 1952.
Analysts are predicting that natural gas will be about one-third cheaper this winter than last, good news for the 55 percent of Americans who heat with natural gas.
Gasoline prices declined by 10.7 percent last month, the largest decrease since July.
With many Americans cutting back on their travel plans in the wake of the terrorist attacks and the anthrax threats, the average price of a gallon of gasoline is $1.18. That is down by about 34 cents from a year ago _ and has fallen below $1 in some parts of the country.
Oil prices plunged to their lowest level in more than two years on Thursday, which could further push down prices at the gas pump. December crude oil futures closed at $17.45 a barrel, the lowest level since June 1999.
Fuel oil prices fell by 5.2 percent in October, the largest drop since April 2000.
The drop in energy prices helped pushed down transportion costs in October, which fell by 2.2 percent. Airfares dropped by 2.5 percent, the biggest decline in a year. Auto prices edged up a tiny 0.1 percent.
Food prices, however, rose 0.5 percent, boosted by higher prices for poultry, fruits and dairy products.