US consumer prices fall

This should really get the deflation worries going. From Bloomberg:

The cost of living in the U.S. fell by the most on record...last month...

The consumer price index plunged 1 percent last month, the most since records began in 1947, the Labor Department said in Washington...

Prices dropped last month as fuel costs plummeted and retailers used discounts for cars and clothing to entice consumers hobbled by job losses and sinking home values...

Excluding food and energy, so-called core prices unexpectedly fell 0.1 percent for the first decline since 1982.

Consumer prices are not the only things falling.

... Commerce Department figures showed housing starts tumbled to an annual rate of 791,000, indicating the industry's contraction may extend into a fourth year...

A slump in building permits signaled residential construction is likely to keep falling in the next couple of months. Permits dropped 12 percent to a 708,000 pace, the lowest since at least 1960, the report from Commerce showed.

The Fed has acknowledged that the US economy in general looks in bad shape.

Fed policy makers last month forecast the U.S. economy will contract through the middle of 2009, with some officials prepared to cut interest rates further in response, according to a record of the group's meeting.

So have financial markets.

Treasuries advanced, and stocks plunged. Yields on benchmark 10-year notes fell to 3.36 percent as of 4:24 p.m. in New York, from 3.52 percent late yesterday. The Standard & Poor's 500 Stock Index closed down 6.1 percent at 806.58, extending its 2008 retreat to 45 percent.

The European economy also does not look in good shape. From Bloomberg:

Construction in the 15-nation euro region fell 3.8 percent from a year earlier, the biggest decline since December, the European Union's statistics office in Luxembourg said in a statement today. Output dropped 1.3 percent from the previous month.

And in the UK, the Confederation of British Industry is piling on the bad news. Monday saw this report from Reuters:

Britain will suffer its sharpest economic contraction in almost two decades next year and the number of people out of work could rise to nearly 3 million by 2010, the Confederation of British Industry said on Monday.

It said it expects the economy to contract by 1.7 percent in 2009 and blamed the fallout from global financial turmoil for the massive revision to the 0.3 percent growth forecast it had issued in September.

As if to back that up, on Wednesday came this Reuters report:

Factory orders continued to fall sharply in November and manufacturers are their most gloomy about future output in nearly 30 years, a survey showed on Wednesday.

The Confederation of British Industry's monthly Industrial Trends survey showed the factory orders balance picked up slightly to -38 from -39 in October.