US consumer prices plunged at a record rate for a second straight month during November, according to a government report today that is likely to fan fears that economic recession is rapidly heightening risks of deflation.
The Labor Department said its closely watched Consumer Price Index dropped 1.7 per cent after falling 1 percent in October - back-to-back record drops since the department started keeping monthly data in 1947. Core prices that exclude food and energy items were flat in November after declining 0.1 per cent in October.
The drop in overall prices exceeded forecasts by Wall Street economists who had expected a 1.2 per cent decline.
On a year-over-year basis, consumer prices were up 1.1 per cent after a 3.7 per cent increase in October. It was the smallest rise since mid-2002.
Energy prices plummeted 17 per cent last month, double the 8.6 per cent fall in October. It was the largest monthly decrease in energy prices since the department started monthly records in 1957.
The latest evidence of weakening prices came just hours before Federal Reserve policy-makers were expected to announce another half percentage point reduction in official interest rates in a bid to spur a healthier pace of economic activity.
But with jobs disappearing at an accelerating rate and the economy now in a year-old recession, consumers have cut back on many purchases and a lengthy period of weakness is anticipated by many economists.
Food prices in November were up a relatively slight 0.2 per cent after a 0.3 per cent October rise. It was the smallest monthly gain in food costs since March.
Reuters