Over-stretched Americans are likely to welcome the news that consumer prices dropped by one per cent last month, driven by falls in the cost of gasoline.

This is the sharpest rate of decline on record and is seen by many analysts as confirmation that the US economy is weakening.

As well as falling gas prices, the cost of food and energy has also been coming down, resulting in a larger than expected overall drop in October.

For those struggling to manage their debt, the reduction is likely to come as good news since it may give the Federal Reserve scope to cut interest rates even further.

Ian Shepherdson, chief US economist with High Frequency Economics, said November's figure is likely to show further declines since core prices are still falling.

"This report clearly reflects the crunch in discretionary consumers' spending, which is likely to persist for the foreseeable future," he remarked.

According to government data, consumer spending slipped by 0.3 per cent in September.

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