Consumer prices fall in November; housing tumbles
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WASHINGTON - Consumer prices tumbled the most on record in November and builders broke ground on the smallest number of new homes in at least half a century as a deepening economic contraction raised the risk of deflation.
The cost of living dropped 1.7 percent between October and November, the most since records began in 1947, a Labor Department report showed in Washington yesterday. Excluding food and energy, so-called core prices were unchanged from a month earlier. Housing starts fell 18.9 percent to an annual rate of 625,000, according to the separate report from the Commerce Department.
Worsening residential construction means the economy will likely shrink by 6 percent or more this quarter, the most since the early 1980s, some analysts said. The figures helped cement the case for the Federal Reserve as it lowered its key interest rate target to a record low yesterday.
"Just as housing continues to fall faster and farther than most thought possible, we wonder if that might be true with the broader economy as well," said Carl Riccadonna, a senior US economist at
Democratic lawmakers are seeking a new effort to address the housing crisis, which last year triggered the collapse in credit markets that has caused almost $1 trillion of write-downs and losses at financial firms. President-elect Barack Obama has committed to stem mortgage foreclosures and enact a two-year fiscal stimulus that will save or generate 2.5 million jobs and jump-start growth.
As the recession spreads around the globe, commodity prices have collapsed, spurring decreases in consumer prices. Five straight months of declines in US retail sales have also prompted stores to use discounts to draw in reluctant buyers.
Consumer prices were forecast to fall 1.3 percent, according to the median forecast of 71 economists in a Bloomberg survey.
Costs excluding food and energy were forecast to rise 0.1 percent, the survey showed. Compared with November 2007, prices increased 1.1 percent, after a year-over-year gain of 3.7 percent in October.
Energy costs dropped 17 percent from October, the most since 1957, the consumer price index report said. Gasoline prices plunged 29.5 percent, and fuel oil costs fell 14.6 percent. Natural gas prices declined 5.2 percent.
Food prices, which account for about a fifth of the CPI, gained 0.2 percent after a 0.3 percent increase in October. New-vehicle prices declined 0.6 percent and clothing costs increased 0.3 percent.
American consumers are scaling back purchases as the value of homes declines, hurting the market for new construction.
Housing starts declined in all regions of the country, led by a drop of 34.6 percent in the Northeast. Construction of single-family homes dropped 16.9 percent to a record-low 441,000 rate.
Building permits, an indicator of future residential projects, declined 15.6 percent to a 616,000 pace, also the lowest on record.
