MercoPress. South Atlantic News Agency

US consumer prices drop 1% and building permits to '69 level

United States consumer prices dropped by a record 1% in October compared with the previous month, as fuel costs kept falling for a third month in a row. Fuel prices were not the only reason for the record drop, as core prices, which exclude food and energy, fell for the first time since 1982.

The fact that prices are falling is a sign of a weakening economy. In another sign, construction of new homes in the US plunged 4.5% percent in October to a record low. Building permits, which are seen as a measure of future projects, dropped 12% to an annual rate of 708,000, the level not seen since at least 1960. Energy prices fell by a record 8.6% in October in comparison with a 1.9% drop in September and 3.1% in August. Fuel prices plummeted 14.2%, also the biggest drop on record. Analysts say that the fall in consumer prices, though sharper than forecasted, was anticipated by the market. Sacha Tihanyi at Scotia Capital believes that the latest inflation data "may be giving investors a little bit of confidence the Fed won't feel constrained in dropping rates even further". The US Federal Reserve cut rates twice during October, taking the key interest rate down to 1%. On Tuesday it was reported that US wholesale prices dropped by 2.8% in October, the biggest one-month decline since records began more than 60 years ago. Most forecasters think that the US economy is already in recession. It has already had one quarter of negative growth.