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Posted by on Dec 16, 2008 in Uncategorized | 0 comments

Retail Prices Fall in November

The U.S. Department of Labor reported that consumer prices fell 1.7% in November from the month before, the fastest drop on record. In part as a result of tumbling oil prices, which fell 17% over one month due to plummeted demand for gasoline, retailers and auto dealers were cutting prices throughout the month of November to bring back wary customers and boost consumer spending, which is also falling.

Vehicle sales tumbled 2.8%, as consumers face higher hurdles for auto loans. Sales at gas stations fell almost 15%, after a sharp drop in fuel prices.

The dip in consumer prices in November continued the October trend, when prices drop approximately 1%.

Sale: Prices Dropped as Retailer Tried to Boost Consumer Spending

Sale: Prices Dropped as Retailer Tried to Boost Consumer Spending

As the United States generally holds a steady inflation rate of about 2% each year, the drop in prices is cause for concern among economists.

“All the factors which had contributed to the 2 percent-plus core rate in recent years — robust demand growth, the weak dollar and rising commodity prices — are now running rapidly in reverse,” Ian Shepherdson, United States economist at High Frequency Economics, wrote in a note, “and it is just a matter of time before core inflation starts to head south.”

As prices continue to drop and the housing market continues to stall, some economists are warning of deflation.