WASHINGTON — American consumers hit by a seemingly endless stream of bad news, from vanishing jobs to shrinking retirement accounts, may be in for a small dose of relief: lower prices at stores.

The Consumer Price Index, the country's most closely watched inflation gauge, probably will show a dip of 0.5 percent in October, after being flat in September, when that report is released today, according to economists' forecasts.

Even with the price reprieve, consumers are in no mood to go on a shopping spree. They have been cutting back sharply on spending because of the strains from job losses, shrinking nest eggs and falling home prices.

The retrenchment jolted the national economy into reverse in the third quarter. Many predict economic activity will continue to shrink the rest of this year and during the first three months of next year, more than satisfying one definition of a recession. That is, two straight quarters where the economy contracts.

Another report out today probably will show that the housing market continues to be in a deep funk. Builders are expected to cut back on home construction, one of the economy's weakest spots.

Faced with exasperated lawmakers upset by shifts in the bailout strategy, Treasury Secretary Henry Paulson launched a spirited defense of his handling of the $700 billion program in a separate hearing on Tuesday.

Members of the House Financial Services Committee grilled Paulson for not doing enough to help distressed homeowners and for failing to force banks that get some of the bailout money to specifically use it to bolster lending to customers, one of the prime reasons behind the rescue package.

"It is essential" that some of the bailout money be used to ease foreclosures, said the panel's chairman, Rep. Barney Frank, D-Mass., a key player in shaping the package that Congress passed and President George W. Bush signed into law Oct. 3.

In a break with the administration, Federal Deposit Insurance Corp. Chairman Sheila Bair, made a fresh pitch for using $24 billion of the bailout pool to help Americans at risk of losing their homes. House Speaker Nancy Pelosi is urging Paulson to support the FDIC plan.

Although Federal Reserve Chairman Ben Bernanke told lawmakers that in cases of some home loans, the FDIC plan could saddle heavy costs on the government, he said it is still a "very promising approach."

While Paulson was resistant to using some of the bailout money to provide mortgage guarantees, he said the administration will look for ways to provide foreclosure relief.

Paulson said he is not planning to initiate another capital injection program beyond those already announced. Thus he's unlikely to tap the remaining $350 billion before the Bush administration leaves office on Jan. 20.