Deflation - good for shoppers, bad for the economy

November 19, 9:25 AMBusiness ExaminerDarrell Proctor

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The holiday shopping season could be saved by something that's bad for the overall economy.

That's deflation. And a report that consumer prices fell by a record 1 percent in October - while good news for folks filling up at the gas pump or buying groceries - is a big worry for economists.

Deflation is the opposite of inflation. And analysts say falling prices are bad because if prices fall below the cost it takes to produce products, companies will more than likely cut production. And that means they will cut jobs.

And with more people unemployed, fewer people will be spending - and that cuts demand even more.

The Labor Department said today that the Consumer Price Index fell 1 percent last month, the biggest drop since Labor began publishing its CPI report in February 1947. And while that bodes of deflation, economists say we're not there yet.

"It is very clear disinflation, but it is not deflation. That would be persistent price declines. You may be seeing deflation in housing and energy, but what this is, is the silver lining of the recession - lower prices." - Lakshman Acuthan of Economic Cycle Research Institute, to CNN