The Labor Department's Producer Price Index (PPI) decreased 2.8% in October, after easing 0.4% in September. It was the sharpest one-month decline on record and much more than the 1.8% decline that economists surveyed by Briefing.com had expected.
The so-called core PPI number, which excludes food and energy prices, rose 0.4% - more than the 0.1% increase analysts had forecast.
"Needless to say this is all about energy prices," said Ian Shepherdson, chief economist at High Frequency Economics.
Energy prices plummeted 12.8% in the month after falling 2.9% in September. It was the largest one-month decline since July 1986 when energy prices fell 14%. That includes a 24.9% drop in gasoline prices, which fell 0.5% a month earlier.
The decline comes as crude oil prices have fallen more than 60% to roughly $55 a barrel since the summer's all-time high above $147 a barrel.
The index for residential natural gas slid 5.9% and prices for home heating oil moved down 9.6% in the month.
Meanwhile, food prices declined 0.2% after climbing for the last 5 months.
The 0.4% increase in core PPI was driven by a sharp 2.6% jump in light truck prices, which include sport utility vehicles, and a 4.1% rise in tire prices. Prices for soaps and detergent rose 1.7%.
Despite the rise in core PPI, many economists say inflation is moderating, which could give the Federal Reserve some leeway when it comes to lowering interest rates.
"The Fed continues to have the green light to ease [monetary] policy," said Anika Khan, an economist at Wachovia Economics Group.
The Federal Reserve cut its benchmark interest rate by a half-percentage point on Oct. 8 and again on Oct. 29 in response to deterioration in global financial system.
"As global economic growth trends downward, wholesale price inflation should be less of a problem in the coming months," Khan said.
Nashvillians enjoy $2 gas while they can
Construction spending falls
