Consumer Prices Drop 0.6%

Washington, DC, December 15, 2005–Consumer prices fell at the fastest rate since 1949 in November, plunging 0.6% as energy prices retreated, according to the Labor Department.

Energy prices fell a record 8% in November, reversing a spectacular 12% gain in September. Still, energy prices are up 18.3% in the past 12 months.

Excluding volatile food and energy prices, the core consumer price index rose 0.2% in November.

The 0.6% drop in the CPI was larger than the 0.4% expected by economists. The 0.2% rise in the core rate was as expected.

The CPI has risen 3.5% in the past year, down from 4.3% in October. Core inflation is up 2.1% in the past year, the same as in October. The CPI and core CPI both rose 0.2% in October.

The CPI indicates a slight acceleration in core prices over the past few months, but no major passthrough from the spike in energy prices. Core prices have risen at a 2.4% annual rate in the past three months.

Gasoline prices fell a record 16% in November, while fuel oil prices dropped 6.1%. But the pain from Katrina is not over. Electricity prices rose a record 3.8%, as utilities passed on the costs of higher fuel, especially natural gas.

Residential natural gas prices fell 0.5% after seasonal adjustments.

Food prices rose 0.3% on a jump in pork and dairy prices.

Housing prices, which represent 42% of the CPI, rose 0.5% as hotel and motel prices rose 1.3%. Owners’ equivalent rent and rent of primary residence both increased 0.2%.

Rising hotel and motel prices accounted for more than half of the increase in the core rate.

Medical care prices increased 0.6% in November, the largest increase since February. Hospital services prices increased 1.1%, the most in three years. Drug prices gained 0.7%.

Transportation prices plunged 4.8%, largely because of falling fuel prices. New car prices fell 0.1%. Airfare fell 1.5%.

Apparel prices were up 0.2% after seasonal adjustment.

Education and communication prices rose 0.4%. Recreation prices were flat.