Prices Drop by Largest Amount in 56 Years

The Labor Department reported Thursday that its closely watched Consumer Price Index dropped by 0.6 percent last month, the biggest monthly decline since a 0.9 percent fall in July 1949.

The decline was better than the 0.4 percent drop that analysts had been expecting. Outside of the volatile food and energy categories, prices were up 0.2 percent, a modest gain that should help relieve fears that this year's surge in energy costs could evolve into more widespread inflation problems.

In other economic news, the number of people who have lost jobs because of the string of devastating Gulf Coast hurricanes climbed to 602,200 last week. That gain reflected a rise of 1,500 jobless applications linked to Katrina and Rita and an additional 1,000 claims linked to Wilma, which hit Florida in October.

Overall, the number filing new claims for unemployment benefits totaled 329,000 last week, compared to 328,000 the week before. Analysts said that even with the slight rise of 1,000 in overall claims, they remained at a level consistent with strong employment growth.

The huge 0.6 percent fall in consumer prices last month followed a small 0.2 percent October increase which had come after a 1.2 percent surge in September, which had been the biggest monthly gain in a quarter-century.

The huge swings in inflation reflected the surge in energy prices related to widespread production shutdowns along the Gulf Coast after the hurricanes hit.

In early September, the nationwide price for gasoline briefly hit a record high above $3 per gallon. But since that time pump prices have been falling, including an additional decline of around 42 cents in November.

That decline pushed gasoline prices down by a record 16 percent in the CPI report, a drop that had followed a 4.5 percent decline in October.

Overall, energy prices were down a record 8 percent, reflecting not only the fall in gasoline but also declines of 6.1 percent for home heating oil and 0.5 percent for natural gas. Those drops still left prices higher than a year ago and homeowners will feel the pinch when they pay heating bills this winter.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.