Deflation Watch

I found the following from Reuters rather telling about our deflation problem:
A check by J.P. Morgan Securities said average prices at the Wal-Mart Supercenter in Virginia were upped by 5.8 percent, the most significant sequential increase since it started the study in January 2009.
Ben Bernanke is on the job so don't worry your little head off about deflation.

2 comments:

Anonymous said...

Supercenters sell groceries and grocery prices are highly volatile. I doubt the furniture, clothing, electronics, garden stuff, etc are up by 5.8%.

What I'm seeing is a sea-change in attitudes about buying. Everywhere you look, there are stories about how people are happier the less they spend, saving is great, how to save, downsizing your life, etc.

So yes, it is possible we'll see a situation where prices are stable or rising because supply falls faster than demand. I'm not sure what to call this this situation, other than Japan-like. This is going to be wicked bad for employment, for companies depending on households to pay back their debts, and for companies with fixed costs who can't easily adjust supply down to compensate for reduced demand.

Tsachy Mishal said...

If commodity prices rise and labor costs in China rise than inflation will be up even though the economy here is slow. Margins can only tighten so far.