Prices fall on flagging energy

All four major price measurements at the Bureau of Labor Statistics fell sharply in October: Import prices were down 4.9 percent, domestic producer prices were down 2.8 percent, export prices were down 1.9 percent, and domestic consumer prices were down 1.0 percent. These are remarkably large over the month changes. Indeed, the consumer price analysis stated that this was "the largest one month decrease since publication of seasonally adjusted changes began in February 1947." The fall in the top-side PPI for finished goods was by a large margin the largest percent decline in that number in the post-WWII era (and was the second largest change in absolute value). The import price decline was put in the context of the past few months and characterized as "three of the four largest monthly declines for the index since being published monthly for the first time in December 1988."

In addition to the size of the drops, there was a common factor in the commodities leading the fall: energy, specifically petroluem products. Although energy price declines are typically thought of as good for the economy, these declines are just too big and destabilizing; especially when seen in conjunction with even modst declines in the core CPI (excludes food and energy) and non-petroleum import prices. There was an increase in the PPI for finished goods besides food and energy, but the indexes for non-food-non-enrgy goods at the intermediate and crude stages of production both fell.