WASHINGTON (MarketWatch) -- U.S. consumer prices plunged by the steepest amount since records were tabulated in 1947, the Labor Department reported Wednesday.

Prices fell 1% in October on a seasonally adjusted basis, with energy prices plunging 8.6%. Read MarketWatch First Take commentary.

Both the overall and energy decreases were the biggest since the government began keeping such records. Data on the overall CPI date back to 1947, and the energy data go back to 1957.

Meanwhile, food prices in October rose 0.3%, the smallest gain since May. Gasoline prices fell a record 14.2% last month. The data on gasoline date back to 1967.

The core consumer price index, which excludes food- and energy-price inputs, eased 0.1%, the first time there's been a decline in the core rate since 1982.

Economists surveyed by MarketWatch had expected the overall October CPI to fall 0.9%, with the core pegged to rise 0.1%.

Following the government's Tuesday report on producer prices, the CPI data deliver further evidence for the Federal Reserve that inflation need not be a top concern for the U.S. central bankers. Tame inflation could open the door for interest-rate cuts if policy makers deem them necessary to help revive the economy.

The drop in core prices might even "stir thoughts of deflation," wrote Daiwa analysts.

"But we would view such a development as having a low probability," according to Daiwa. "Inflation is a monetary phenomenon, and the Fed has demonstrated its willingness to pursue accommodative" policy, they wrote.

Ian Shepherdson, chief U.S. economist with High Frequency Economics, wrote that he expected an even larger drop in gasoline prices.

"So there'll be an even bigger drop in November," Shepherdson wrote.

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

CPI details

The overall CPI has risen 3.7% in the past year, while the core rate for retail-level inflation has grown 2.2%.

Average real weekly earnings are up 2.9% in the past year.

The index for owners' equivalent rent rose 0.1% in October.

Fuel oil prices dropped 11.8%. Natural gas prices fell 4.4%, as electricity gained 1.7%.

The transportation index fell a record 5.4%. This data has been kept since 1947. Prices for airlines fares fell 4.8%, and dipped 0.5% for new vehicles.

Medical care rose 0.2%, while recreation gained 0.1%.

The price index for meats, poultry, fish and eggs rose 0.6%, while the index for fruits and vegetables fell 2.2%.

Also Wednesday, the Commerce Department reported that U.S. home builders reduced their starts of new homes by 4.5% in October, driving new construction to the lowest level since just after World War II. Housing starts have now fallen 38% in the past year and are down about 70% from the peak in early 2006. See full story.