Tags: Deflation | Concerns | Economy | Weakens

Deflation Concerns Spring Up as Economy Drifts

By    |   Sunday, 05 May 2013 03:09 PM

Wall Street traders are fretting about falling prices more than inflation because a raft of financial reports show the economy is starting to weaken, according to USA Today.

The newspaper predicted the Federal Reserve may have to shift gears to focus on preventing a bout of deflation from taking hold.

"Worst case scenario: a deflationary spiral like the one during the Great Depression, which
triggered individual and corporate bankruptcies across the land," USA Today said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"After the stock market crash of 1929, it took the government years to get the economy growing again."

Among the reports showing a slack economy are – a hiring slowdown, slower construction
spending, weaker manufacturing, and a slowdown in wage pressures that are less than half of
what the Fed has been aiming for.

And falling government bond yields are viewed as pushing key commodity prices lower, such as those for crude oil and gold.

If consumers and businesses believe the prices of goods and services are declining, "they tend to delay spending if possible," USA Today said.

"They want to wait and get the lowest price they can. That sentiment would snuff out the bull market, likely in an alarming sell-off."

MarketWatch also speculated the economy may be entering "another spring swoon," given the tone of some recent economic data.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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Wall Street traders are fretting about falling prices more than inflation because a raft of financial reports show the economy is starting to weaken, according to USA Today.
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2013-09-05
Sunday, 05 May 2013 03:09 PM
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