Consumer Prices Fall at Record Rate for Second Month in a Row

By Howard Schneider
Washington Post Staff Writer
Tuesday, December 16, 2008; 10:54 AM

Consumer prices fell at a record rate in November and housing starts plummeted to a level not seen in nearly half a century, stark signs of the weakness that has spread through the U.S. economy.

With the Federal Reserve expected to cut interest rates today and perhaps take other steps to try to rekindle economic growth, two new reports from the federal government this morning showed just how far the situation has decayed.

The consumer price index fell 1.7 percent in November, the second consecutive record-setting monthly drop. Led by the steep decline in energy prices, the report could raise concerns about a general deflation -- a widespread and steady drop in prices that can undermine businesses and dissuade consumers from making any but the most necessary purchases in hopes of even lower prices in the future.

Excluding food and energy prices, which are particularly volatile, so-called core inflation was flat, at 0 percent.

There was continued weakness in the troubled housing sector as well. Housing starts fell in November to a seasonally adjusted annualized rate of 625,000 -- the lowest since the federal government began keeping records in 1960. That represents a nearly 19 percent drop from the month before, and a close to 50 percent drop from a year ago.

Building permits, a barometer of future activity, fell to a seasonally adjusted annualized rate of 616,000, 15.6 percent below October and a 48 percent decline over November a year ago.

As a measure of how low expectations have become, a $2.2 billion quarterly loss posted by the Goldman Sachs Group was treated as good news. Although it was the first loss posted by the investment company since it went public in 1999, it was less of a loss than many analysts expected. Goldman stock rose 7.8 percent in morning trading.

U.S. markets overall were rising in advance of the Fed rate decision.

At the same time, electronics retail giant Best Buy reported that its earnings for the most recent three months fell 77 percent compared with the same period a year ago.

Retailers are bracing for a dismal holiday shopping season, with consumers beset by rising unemployment, falling home and equity values, and a general sense of economic unease.

Best Buy chief executive Brad Anderson said that has created a "dramatic and potentially long-lasting change in consumer behavior," the Associated Press reported. In the middle of a season usually devoted to peddling the latest in consumer technology, the company announced a wide-ranging buyout program to trim payrolls and said it would slash capital investment by half.

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