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US consumer prices slide 1.7%
Consumer prices and homebuilding hit record lows in November, according to government data released on Tuesday. Prices in the US fell by 1.7 per cent in November from the previous month as the plunging value of oil and deep discounts from retailers drove down the cost of living, the department of labour said. Overall prices increased by 1.1 per cent year-on-year. Economists predict they could fall flat by January and sink to -2 per cent by next July. The last negative inflation rate was recorded in August 1955. The second record decline in as many months came as collapsing energy prices fell by 17 per cent last month, double the October drop. Energy prices are 32.4 per cent below their peak in July, and the price of petrol fell by 29.5 per cent in November. Falling prices could represent a glimmer of economic relief for struggling consumers. According to economists at RDQ Economics the plunging energy prices represent a $130bn boost to real household incomes when compared to February 2007 prices. Core inflation, excluding the price of food and energy, was unchanged in November and rose by 2 per cent year-on-year. Slight increases in prices for some commodities and services were offset by declines in the prices of cars, airline fares and hotel rates. The stagnant core inflation rate could continue to stoke fears of deflation, notes Alan Ruskin, a strategist at RBS Greenwich Captial. Meanwhile, the plummeting number of US housing starts signalled that the excessive supply of homes may be approaching a trough. The commerce department said on Tuesday that US homebuilders have halted construction of new homes to a record level. Housing starts dropped by an annual rate 18.9 per cent in November to 625,000. Starts for single-family homes fell 16.9 per cent to a record-low 441,000. Falling prices have caused builders and producers to slash production, fearful that what they build will be worth less in several months, according to Brian Bethune, an economist at IHS Global Insight. The drop was worse than economists expected and was the sharpest monthly decline since 1984. Posted by: lotp 2008-12-17 |
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