Producer price index falls at record rate

Producer prices fell at a record pace in the month of October as spending declined sharply. Consumers and whole sale spenders have been reducing their spending sharply as the country braces for a recession. The stock market took the news in stride as there is little doubt that spending will continue to drop over the upcoming months as the market looks for signals of a turnaround. Mortgage rates continue to move lower with the news as the ten year bond has dropped below 3.7%, pushing fixed rate mortgage loans down closer to six percent.

The stock market is hovering slightly above 8,000 and has dropped over 6% in the month of November. The rapid drop of almost 3% in producer prices should help to set the stage for future rate cuts in the upcoming months as the Fed will agressively look to try to stimulate new growth. The FOMC will meet one more time in 2008 and likely could drop the Fed Funds rate to its lowest level in the past 20 years.