WASHINGTON (Reuters) - Consumer prices plummeted at the sharpest rate on record in October as a slowing economy caused energy costs to drop for a third straight month, according to a Labor Department report on Wednesday. The widely watched Consumer Price Index fell 1 percent, exceeding forecasts by Wall Street analysts for a 0.8 percent decline and the biggest drop since the department began monthly data in 1947. Core prices, which exclude food and energy items, declined 0.1 percent in contrast to the 0.1 percent advance that had been forecast. The latest sign of rapidly declining prices, including for clothing and transportation as well as energy, implies a weakening economy no longer faces any inflation threat and could see deflation return if consumer demand keeps softening. Energy prices dropped 8.6 percent in October, after declines of 3.1 percent in August and 1.9 percent in September. October was the biggest drop since the department began keeping seasonally adjusted energy prices in 1957. Gasoline prices plunged 14.2 percent in October, also a record drop. However, gasoline prices were still 12 percent above the price a year ago. Food costs were up 0.3 percent in October, half the 0.6 percent rise posted in September. On a year-over-year basis, the Consumer Price Index rose 3.7 percent, the smallest increase in a year. (Reporting by Glenn Somerville, editing by Neil Stempleman)

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