Dec. 16 (Bloomberg) -- Consumer prices tumbled the most on record in November, and builders broke ground on the fewest new homes in at least half a century, as a deepening economic contraction raised the risk of deflation.

The cost of living dropped 1.7 percent last month, more than economists had forecast, a Labor Department report showed in Washington. Excluding food and energy, so-called core prices were unchanged from a month earlier. Housing starts last month fell 18.9 percent to an annual rate of 625,000, the Commerce Department said.

Worsening residential construction means the economy will likely shrink by 6 percent or more this quarter, the most since the early 1980s, some analysts said. The figures help to build the case for the Federal Reserve to lower its key interest-rate target to a record today, and signal willingness to step up its injections of cash to avert a depression.

“Just as housing continues to fall faster and farther than most thought possible, we wonder if that might be true with the broader economy as well,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc., which downgraded its fourth-quarter gross domestic product forecast to a drop of as much as 8 percent after today’s housing report. Risks of deflation “are increasing on the horizon.”

Democratic lawmakers are seeking a new effort to address the housing crisis, which last year triggered the collapse in credit markets that has caused almost $1 trillion of writedowns and losses at financial firms. President-elect Barack Obama, who has committed to stem mortgage foreclosures and enact a two-year fiscal stimulus, meets with his economic team later today.