Falling energy costs meant US wholesale prices dropped by 2.8% in October, the biggest one-month decline since records began more than 60 years ago. The larger-than-expected fall was triggered by a 12.8% drop in energy prices, the biggest monthly decline for 22 years.
Core producer inflation which excludes energy and food costs however was up by 0.4%. The lack of inflationary pressures may give further scope to the Federal Reserve to cut interest rates again. The Fed cut rates twice during October, taking the key interest rate down to 1%. Energy prices have fallen sharply in recent weeks as the price of oil has fallen. After hitting a record price of above 147 USD a barrel in July, oil prices are now around 55 a barrel. The latest price figures from the US Labour Department showed that gasoline prices dropped 24.9% last month, while food prices fell by 0.2%. The increase in core inflation was partly due to rises in the cost of light trucks and aircraft. The US economy has already had one quarter of negative growth and many analysts believe its economy is set to decline further. On Monday, a survey of analysts by the National Association for Business Economists found that most forecasters thought the US was already in recession, and that the downturn was set to continue well into 2009.