Consumer Prices Take a Tumble

WASHINGTON â€”  U.S. consumer prices in November posted the biggest decline in 56 years, with a large drop in energy costs more than offsetting increases in many basic living expenses such as food, housing and healthcare, the government said Thursday.

Other economic data released Thursday showed surging output at factories, mines and utilities across the country, and two regional surveys pointed to more manufacturing activity in New York state and the mid-Atlantic region.

The 0.6% drop in consumer prices last month, led by a 16% drop in the cost of gasoline, was slightly larger than the 0.4% reversal expected by Wall Street and was the biggest decrease since July 1949.

Excluding food and energy costs, so-called core inflation rose 0.2% in November, in line with market forecasts.

Although the record drop in gasoline pump prices may make people feel a bit better about their household budgets, many other prices rose in November -- including the cost of food, electricity, healthcare, housing and education, according to the Labor Department report.

“As usual, the headline number hides the true facts,� said Joel Naroff, chief economist at Naroff Economic Advisors. “Outside energy, there was little relief for the already burdened consumer.�

Over the last year, consumer prices have climbed 3.5%, lower than October’s 4.3% inflation rate but still above the 3.2% rise in average weekly earnings. That means family budgets are not keeping pace with rising prices.

The annual increase in core inflation, which is often more closely watched by financial markets and the Federal Reserve because it is not as volatile, remained at a comparatively tame 2.1% in November.

Still, Global Insight economist Brian Bethune said the core index might soon begin to feel persistent upward pressure as the cumulative increases in energy costs fed into other prices -- such as rent and lodging away from home.

The decline in prices in November was driven by sharp decreases in energy costs after a hurricane-related spike in the fall. The 16% decline in gasoline prices was the largest monthly decline according to records dating to 1967. Fuel oil costs fell 6.1% and natural gas prices fell 0.5%.

Also Thursday, a report from the Fed showed output from U.S. factories, mines and utilities rose a better-than-expected 0.7% in November, pushed higher by a post-hurricane recovery in the petrochemical and energy sectors.

The gains were echoed in a report from the New York Federal Reserve Bank. It showed an unexpected jump in manufacturing conditions in that state, with new orders up but shipments and employment down.

The Labor Department reported that the number of U.S. workers filing new claims for jobless aid rose 1,000 last week to 329,000, bucking expectations for a small decline.