Tamed energy prices prompt 1% CPI drop

The consumer price index, a key indicator of inflation, fell 1%, marking the largest monthly decline since the index was first computed in 1947, according to the Department of Labor. The record drop was triggered by an 8.6% drop in energy prices in October, marking the largest decrease for energy since records were first kept in 1957. The index has risen 3.7% since October 2007, mostly due to record energy prices in the spring and summer months. Economists surveyed by briefing.com had estimated that the index would fall 0.7%. Energy prices had fallen 1.9% in September and 3.1% in August. Gasoline prices fell by a record 14.2% last month, which was the largest decline since gasoline prices were first tabulated in 1967. Food prices rose 0.3% in October, marking the smallest increase since May. The core consumer price index, which doesn't include food and energy prices, fell 0.1%, marking the first decline since 1982. Economists surveyed by briefing.com expected the index to increase 0.1%. "I don't think it is that surprising given the huge declines in commodity prices in the last month and the continuing weakening of the economy," said Ryan Jacob, chairman and chief executive of Jacob Asset Management in Redondo Beach, Calif. with assets under management of $300 million. "We are likely entering a deflationary environment and the data also underscores the need for the government to be active in providing stimulus."