Falling Energy Prices Lead Price Decline in October

Prices Byte by Dean Baker 

For Immediate Release: November 16, 2006

Contact: Lynn Erskine, 202-293-5380 x 115

The overall CPI fell by 0.5 percent in October, driven largely by a 7.0 percent decline in energy prices. The core (excluding food and energy) CPI rose by 0.1 percent, slightly less than had been expected. The annual rate of inflation over the last three months has been -2.9 percent, as energy prices have fallen at a 43.8 percent annual rate over this period. The annual inflation rate in the core over the last three months has been 2.3 percent, down somewhat from the 2.7 percent rate over the last year.

There were a few anomalies that lowered the core inflation rate in October, notably a 0.7 percent drop in apparel prices (this follows large increases in the prior 2 months), a 1.2 percent decline in used car prices, a 0.6 percent drop in video and audio products, and a 0.5 percent decline in hotel prices. On the other side, the 0.7 percent rise in phone prices is not likely to be repeated.