By Bob Willis Nov. 19 (Bloomberg) -- The cost of living in the U.S. probably slid in October by the most in almost six decades as fuel costs plummeted and retailers discounted merchandise to entice shell-shocked customers, economists said before a government report today. Consumer prices probably dropped 0.8 percent last month, the most since 1949, after being unchanged in September, according to the median estimate in a Bloomberg News survey. Excluding food and energy, so-called core prices may have risen 0.1 percent for a second month. A recession that may become the worst in decades raises the risk that deflation, or a prolonged decline in prices, will be another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Target Corp. is among retailers cutting prices in an effort to lure away cash-strapped holiday shoppers from Wal-Mart Stores Inc. “It is remarkable that in just a few months fears have switched from inflation to deflation,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. The about-face is “a testament to how suddenly the global economy’s expansion has turned into recession.” The Labor Department’s consumer-price report is due at 8:30 a.m. in Washington. Forecasts in the survey of 77 economists ranged from a decline of 1.2 percent to a 0.4 percent increase. A separate report at the same time may show the housing recession at the heart of the economic downturn shows no signs of letting up. New-home starts in October dropped to a 780,000 annual pace, the lowest level since records began in 1959, economists forecast the Commerce Department will report. Gasoline Plummets The drop in consumer prices last month was probably led by a slump in fuel costs. A gallon of regular gasoline at the pump averaged $3.08 in October, down 17 percent from the prior month, according to AAA. The price dropped to $2.07 a gallon on Nov. 17. A Labor report yesterday showed wholesale prices fell 2.8 percent last month, the most on record. Last week, the government also said the cost of imported goods declined by the most ever. Americans are pulling back even as fuel costs retreat. Retail sales fell 2.8 percent last month, the most on record, Commerce Department figures showed last week. Mounting job losses and record foreclosures are causing American consumers, who account for more than two-thirds of the economy, to retrench. Wal-Mart, the world’s largest retailer, said yesterday it planned to reduce U.S. prices on Thanksgiving food and Christmas merchandise to lure customers during the holidays. More ‘Rollbacks’ “You’ll see a lot of rollbacks,” Eduardo Castro-Wright, Wal-Mart’s U.S. stores chief, told analysts at a Morgan Stanley conference in New York. Rollbacks refer to price reductions the retailer scatters throughout grocery, pharmacy and other departments to spur sales. Target, the second-largest U.S. discounter, said this week it plans to add more grocery items and offer “sharper” discounts to draw shoppers who are shunning jewelry, clothing and home goods, which account for more than 40 percent of its revenue. “Right now, the consumer is very hesitant,” Chief Executive Officer Gregg Steinhafel said during the company’s Nov. 17 earnings call. “They’re very stressed.” Sales of clothing and home goods have been “sharply lower,” partly because of banks decreasing consumer credit limits, Chief Financial Officer Douglas Scovanner said during the call. Leaders in the U.S., Europe and Asia are calling for increased government spending to make up for the loss of consumer purchasing power and lessen the global recession. Obama and House Democrats are planning to spend as much as half a trillion dollars to stimulate the world’s biggest economy and U.K. Prime Minister Gordon Brown pressed other leaders of the Group of 20 nations to follow that effort last weekend. Bloomberg Survey ================================================================ CPI Core Housing Building CPI Starts Permits MOM% MOM% ,000’s ,000’s ================================================================ Date of Release 11/19 11/19 11/19 11/19 Observation Period Oct. Oct. Oct. Oct. ---------------------------------------------------------------- Median -0.8% 0.1% 780 774 Average -0.7% 0.1% 783 773 High Forecast 0.4% 0.3% 870 880 Low Forecast -1.2% 0.0% 700 700 Number of Participants 77 77 75 48 Previous 0.0% 0.1% 817 805 ---------------------------------------------------------------- 4CAST Ltd. -1.0% 0.1% 780 770 Action Economics -0.7% 0.2% 817 807 AIG Investments -0.5% 0.1% 800 --- Aletti Gestielle SGR -0.7% 0.1% 800 780 Ameriprise Financial Inc -0.4% 0.1% 790 780 Argus Research Corp. -0.3% 0.1% 812 --- Banc of America Securitie -0.9% 0.2% 760 --- Bank of Tokyo- Mitsubishi -0.7% 0.2% 744 744 Bantleon Bank AG -0.7% 0.2% 770 760 Barclays Capital -0.9% 0.2% 775 --- BMO Capital Markets -0.8% 0.1% 776 765 BNP Paribas -0.9% 0.1% 775 --- Briefing.com -0.7% 0.1% 780 760 Calyon -0.5% 0.2% 776 760 CIBC World Markets -0.8% 0.2% 760 755 Citi -0.7% 0.1% 790 780 ClearView Economics -0.5% 0.1% 750 --- Commerzbank AG -0.9% 0.1% 780 770 Credit Suisse -0.8% 0.1% 800 --- Daiwa Securities America 0.4% 0.2% 850 --- DekaBank -0.8% 0.1% 750 750 Desjardins Group -0.6% 0.1% 790 795 Deutsche Bank Securities -0.6% 0.1% 750 775 Deutsche Postbank AG -0.8% 0.1% 790 --- Dresdner Kleinwort -0.7% 0.1% 780 --- DZ Bank -0.6% 0.2% 775 750 First Trust Advisors -0.9% 0.2% 762 --- Fortis -0.8% 0.2% 800 --- FTN Financial -0.5% 0.1% 775 --- Goldman, Sachs & Co. -0.9% 0.1% 776 --- Helaba -0.3% 0.1% 780 765 Herrmann Forecasting -1.0% 0.2% 775 757 High Frequency Economics -0.9% 0.2% 780 750 Horizon Investments -0.9% 0.1% 760 --- HSBC Markets -0.8% 0.2% 760 750 IDEAglobal -0.9% 0.1% 795 780 IHS Global Insight -0.9% 0.2% 778 780 Informa Global Markets -0.9% 0.1% 812 800 ING Financial Markets -0.6% 0.0% 760 775 Insight Economics -0.6% 0.2% 795 --- Intesa-SanPaulo -0.9% 0.2% 800 --- J.P. Morgan Chase -0.8% 0.2% 790 790 Janney Montgomery Scott L -1.0% 0.2% 783 828 JPMorgan’s Private Wealth -0.6% 0.1% 780 760 Landesbank Berlin -0.2% 0.3% 840 820 Lloyds TSB -0.8% 0.2% 780 780 Maria Fiorini Ramirez Inc -0.8% 0.1% --- --- Merk Investments -0.8% 0.2% 750 730 Merrill Lynch -0.9% 0.1% 755 745 MFC Global Investment Man -1.0% 0.0% 775 775 Moody’s Economy.com -0.6% 0.1% 780 730 Morgan Keegan & Co. -1.0% 0.1% 775 --- Morgan Stanley & Co. -1.0% 0.1% 775 --- National Bank Financial -0.9% 0.1% 785 770 National City Corporation -0.2% 0.2% 870 880 Newedge -1.0% 0.1% --- --- Nomura Securities Intl. -0.9% 0.1% 830 820 Nord/LB -0.8% 0.2% 780 790 PNC Bank -0.5% 0.1% 780 --- RBS Greenwich Capital -1.0% 0.1% 760 --- Ried, Thunberg & Co. -0.9% 0.2% 770 --- Schneider Trading Associa -0.9% 0.2% 776 748 Scotia Capital -1.0% 0.1% 700 700 Societe Generale -0.5% 0.1% 820 --- Standard Chartered -0.8% 0.2% 780 773 Stone & McCarthy Research -0.8% 0.0% 795 --- TD Securities -0.5% 0.2% 800 780 Thomson Financial/IFR -0.3% 0.1% 795 775 Tullett Prebon -1.0% 0.0% 770 --- UBS Securities LLC -1.0% 0.1% 790 --- Unicredit MIB -0.5% 0.2% 775 775 University of Maryland -0.7% 0.2% 800 780 Wachovia Corp. -0.5% 0.1% 770 --- Wells Fargo & Co. -0.6% 0.2% 813 798 WestLB AG -0.8% 0.1% 780 770 Westpac Banking Co. -1.2% 0.2% 792 781 Wrightson Associates -0.9% 0.2% 770 770 ================================================================ To contact the report responsible for this story: Bob Willis in Washington at bwillis@bloomberg.net

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