In a report that reflected the dramatic plunge in crude oil prices, U.S. producer prices took a record fall in October, the government said Monday.

The Labor Department said its producer price index fell 2.8% last month, much greater than the 1.8% decline economists had forecasted. The energy component of the report took its biggest decline since July 1996.

Excluding volatile food and energy prices, core producer prices rose 0.4% in October, matching the gains made the month before. Economists had forecasted a more modest increase of 0.1% in core inflation.  

Producer prices are watched closely by Wall Street and economists because businesses must either absorb higher costs -- which translates into lower profitability -- or they have to pass on those costs to consumers.

Consumer inflation will be reflected in the consumer price index, which will be released Wednesday. Economists are looking for CPI to fall 0.7%, according to data provided by Thomson Reuters.

Despite the 2.8% drop in producer prices, PPI remains 5.2% higher from this same time last year, a sign that despite the lingering effects of high oil can still be seen in costs for businesses.

“We view these as legacy increases following the surge in commodity prices, which is now reversing,” wrote Ian Shepherdson, Chief U.S. Economist with High Frequency Economics.