U.S. wholesale prices tumbled throughout the production pipeline last month, suggesting that inflationary pressures are easing more quickly than had been expected.

Meanwhile, U.S. retail sales fell a second straight month during October, dragged down by gasoline stations, but demand at stores outside of that sector climbed.

The producer price index for finished goods fell by 1.6% in October, matching the record decline, after decreasing 1.3% in September, the U.S. Labor Department said today. The core producer price index for goods excluding food and energy decreased 0.9%, the steepest drop since August 1993.

In the 12 months ending in October, overall wholesale prices fell 1.6%, the sharpest decline since September 2002. The year-over-year rise in producer prices was 4.9% as recently as June, an indication of just how quickly price pressures have decelerated since the summer. The core PPI was up just 0.6% compared to a year ago, the slowest annual rate since November 2003.

The numbers were well below Wall Street estimates. Economists had called for for a 0.6% decline in the PPI and 0.1% climb in the core rate.

The Labor Department will release consumer prices for September on Thursday.

Today’s report showed producer prices for energy decreased 5% last month compared to September. Gasoline tumbled 7.9%. Residential natural gas fell a record 9.3% on the month. Food prices decreased 0.8% in October.

Wholesale prices of passenger cars decreased 2.3%, while wholesale light truck prices tumbled a record 9.7%. The October car and light truck data included quality changes for 2007 model vehicles. Computer prices fell 3.1%.

Deeper in the production pipeline, price pressures declined sharply last month. Prices of raw materials, known as crude goods, declined by 10.5%, while excluding food and energy they fell 1.3%. Intermediate goods prices fell 1.1% and were unchanged excluding food and energy.

Retail sales decreased by a seasonally adjusted 0.2%, the U.S. Commerce Department said today. September sales decreased by 0.8%, revised from a previously reported 0.4% drop. Economists had forecast overall retail sales slipping 0.4% in October.

Gas station sales plunged 6.0% last month after diving 11.1% in September. Analysts say lower gasoline prices pushed down the value of station receipts. Stripping away sales at gas stations, demand at all other retailers was up 0.4% in October a second month in a row.

Auto and parts retail sales rose 0.6% in October, after advancing 0.7% in September. Outside the auto sector, all other retail sales dropped 0.4%. Economists expected a 0.2% slide. Sales excluding autos were 1.2% lower in September.

Excluding both autos and gasoline, all other retail sales increased 0.3% in October a second straight month.

Sales rose 1.3% at health and personal care stores; 0.3% at restaurants and bars; 0.1% at clothing stores; and 1.0% at food and beverage stores. Sales at electronics and appliance stores were flat in October.

Demand at retailers peddling home improvement goods fell amid the housing sector slowdown. Furniture store sales declined 0.7% after falling 0.2% in September. Building material and garden stores sales decreased 0.3% after plummeting in September by 1.8%.