Consumer prices in the U.S. fell by more than anticipated in the month of November, according to a report released by the Labor Department on Wednesday, with the decrease reflecting another sharp drop in energy prices.
The Labor Department said its consumer price index dropped by 0.3 percent in November after coming in unchanged in October. Economists had expected the index to edge down by 0.1 percent.
The decrease by the consumer price index in November reflects the biggest one-month drop since December of 2008.
Energy prices helped to lead the way lower, plunging by 3.8 percent in November after tumbling by 1.9 percent in the previous month.
The report showed a particularly steep drop in gasoline prices, which plummeted by 6.6 percent in November and are down by 10.5 percent year-over-year.
On the other hand, the Labor Department said food prices rose by 0.2 percent in November after inching up by 0.1 percent in October. Food prices are up by 3.2 percent compared to the same month a year ago.
Core consumer prices, which exclude both food and energy prices, inched up by 0.1 percent in November after rising by 0.2 percent in October. The modest uptick matched economist estimates.
A 0.3 percent increase by the shelter index contributed to the uptick in core prices along with higher prices for medical care, airline fares, and alcoholic beverages.
Meanwhile, the bigger than expected monthly drop by the headline consumer price index contributed to a notable slowdown in the annual rate of growth, which slowed to 1.3 percent in November from 1.7 percent in October.
The annual rate of core consumer price growth also slowed to 1.7 percent in November from 1.8 percent in the previous month.
Jay Morelock, an economist at FTN Financial, said, "The Fed sees energy price fluctuations as transitory, so beside a brief mention in the Fed minutes about keeping an eye on oil prices, do not expect this CPI to materially impact today's Fed decision."
"If they delay tightening due to low oil prices, it will be out of caution for the potential economic impact," he added. "If the fall in energy prices continues, the loss of capital spending by energy companies could cause GDP to fall in the first half of the year. The Fed will have to take notice of that."
Last Friday, the Labor Department released a separate report showing that U.S. producer prices fell by slightly more than anticipated in the month of November.
The Labor Department said its producer price index for final demand fell by 0.2 percent in November after rising by 0.2 percent in October. Economists had expected the index to edge down by 0.1 percent.
The slightly bigger than expected decrease reflected a steep decline in energy prices, which plunged by 3.1 percent in November after plummeting by 3.0 percent in October.
Excluding food and energy prices, the core producer price index came in unchanged in November after rising by 0.4 percent in the previous month. Core prices had been expected to inch up by 0.1 percent.
Meanwhile, the Labor Department noted that the annual rate of producer price growth slowed to 1.4 percent in November from 1.5 percent in October, reflecting the slowest rate of growth since February.
Annual core producer price growth came in at 1.8 percent in November, unchanged from the previous month and matching the highest rate since May.
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