Deflation worries send Dow below 8,000

Housing prices came to a rare standstill, and prices even in normally robust areas like medical care and education rose by a subdued 0.2 percent, the price report showed.

Stephen Stanley, chief economist at RBS Greenwich Capital, said prices may fall even further in coming months as the halving of oil prices works its way through the economy.

“Certainly, airfares are quite sensitive to energy prices, so a few more months of steep drops seems likely,” he said. “More generally, travel and tourism are going to suffer in a deep recession, so hotel rates and airfares will generally remain soft, even after energy prices start to level off.”

Mr. Stanley also expects prices to keep falling in the auto industry, which has been hit hard not only by high gas prices, but by the severe credit crisis.

“The motor-vehicle industry is a mess, so I would put no limits on how far or how fast new- and used-auto prices can fall,” he said. “In short, the October weakness in these categories is not a one-month phenomenon.”

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