Consumer prices dropped by the largest amount last month in the 61 years the records have been kept. Why that’s not the immediate good news we might think:
While falling prices especially for such key products as gasoline can provide a break for consumers, analysts said the worry is if price declines become so entrenched that consumers stop buying things, awaiting further price drops. That is one of the problems facing housing as buyers in some markets stay on the fence, expecting home prices to drop further.
We can’t put off filling the car’s tank until gas hits $1.50 a gallon, but if something we want has already come drastically down in price, why buy it now when there’s every chance the price will come down even more? I’d sort of like a new laptop, but any day now I can probably pick one up for pocket change. If a lot of people behave that way — and a lot are — hello, deflation and . . . that other “d” word.
There’s someone in my gift-exchange circle who gives me cash every Christmas and birthday — not a lot, but it can add up if you don’t spend it. I put it aside one year, then forgot about, Next birthday and Christmas, I did the same thing. The more money I accumulated, the less likely I was to spend it. It’s quite a tidy sum right now, and, guess what? It’ll grow a little more this year.
So there you have it. It’s all my fault. Well, yours, too. Our economy is so consumer-driven that we can pump it up or tear it down just by our collective mood. So let’s get out there and spend to save the country!