Inflation Concerns Ease as Wholesale Prices Drop

During the month of October wholesale prices on goods experienced the largest single month drop in the last 60 years. These drops have begun to decrease the fears of inflation.

In October overall wholesale prices dropped by a record 2.8 percent. Energy prices were the major contributor to the drop in prices with gasoline leading, and shocking economic analysts who previously held fears about surging prices for energy, food and commodities.

The last time the United States actually experienced deflation was in the 1930's during the Great Depression. Now analysts are speculating about another deflation in the economy.

Contributing to the current drop in wholesale prices, many retailers continue to drop their prices to maintain current sales bases.

Many analysts believe that despite the current recesion the United States is in may get better with the Fed cutting interest rates further with the retreating inflation. The fed has already cut interest rates by a full point during the month of October with half a point on October 8th and another half a point on October 29th.

The federal funds rate currently stands at 1 percent which is a low for the last 50 years.

The wholesale price drops in October have had previous drops of .9 percent in August and .4 percent in September. The last time the United States saw large drops in wholesale prices was in October of 2001 right after the 9/11 terrorist attacks, with a 1.6 percent drop.

All types of energy showed big declines with gasoline falling by a record 24.9 percent, surpassing the old mark of a 22.1 percent drop in March 1986. Home heating oil prices were down 9.6 percent, natural gas intended for home uses fell by 5.9 percent, and liquefied petroleum gas dropped by 27.6 percent, the biggest decline in more than three decades.