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Monday 22nd of March 2010
November 19, 2008    

US consumer prices fall by record 1%

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by Kay Murchie
”US

Figures from the Labor Department revealed that US consumer prices plummeted 1% in October - the highest fall since records began in 1947.

This fall is seen as a sign of US economic weakness and have raised concerns of an imminent recession.

The fall in consumer prices was attributed to the cost of fuel which fell for a third consecutive month.

Meanwhile, according to economists, the sharp fall in consumer prices paves the way for further interest rate cuts.

The US Federal Reserve cut rates twice during October, taking interest rates down to 1%. The latest figures from the Labor Department leads Wall Street to believe that interest rates will be cut by a further 0.5% on December 16.

Commenting on the results from the Labor Department, Sacha Tihanyi at Scotia Capital, believes the figures reflect the crunch in discretionary consumers’ spending and this is likely to persist in the short term.

In the meantime, separate figures from the Commerce Department revealed that new housing starts in the US fell to a record low last month.

The figures show that new housing starts plummeted 4.5% in October, to an annual rate of 791,000.

Several forecasters believe that the US economy, which is the world’s largest, is already in recession. It has already experienced one quarter of negative growth.

A country is considered to be in recession when it experiences two consecutive quarters of negative growth.

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