On a month-by-month view, the consumer price index shrank by 0.5% as gasoline prices tumbled sharply from September.

Analysts had expected a 0.6 decline month-over-month, with the annual index forecast to come in at +3.1%.

The core inflation rate, which excludes the eight most volatile components including gas, mortgage interest and fresh fruits and vegetables, was unchanged from September, in line with expectations, and was +1.7% on an annual basis, somewhat lower than the +1.9% forecast.

Stripping out seasonal adjustment, consumer prices plunged 1.0% from September, the largest monthly decline since June, 1959. Gasoline prices were the largest contributor to the decrease, falling 13.4% from September. Natural gas and fuel oil prices were also down sharply.

The price of women's clothing (-3.9) also helped bring down the monthly index. The most significant upward pressure came from the annual increase in property taxes, which rose 3.2%. Changes in property taxes are reflected in October each year.

The cost of gas, while down significantly from September, was 13.3% higher than it was in October, 2007, keeping the annual inflation rate from going lower. Excluding gasoline, the annual increase in CPI would have been 2%.

Of the eight major components in the CPI, seven recorded increases in the 12 months to October, with the clothing and footwear index the only one to decline.

Higher mortgage interest costs, rising prices for other fuel and more expensive food products all put upward pressure on the headline inflation rate.

Food prices were 6.1% higher year-over-year, due mainly to a 14.2% increase in bakery products and a 19.2% jump in cereal prices. Mortgage interest costs were 7.2% higher on an annual basis.

The most significant downward contributor to annual CPI was a 9% decline in the price to purchase or lease a passenger vehicle. Automobile prices fell 1.1% between September and October.

Computer equipment and supplies were 12% cheaper in October compared with the same month last year and video equipment was down 11.5%.

New Brunswick posted the lowest annual inflation rate among provinces in October, at +1.8%. Prince Edward Island was the province with the highest rate (+3.9%). Annual inflation was lower than in September in all provinces except Saskatchewan and Manitoba.

By Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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