Once again, consumer prices have gone down. A lot of that has to do with the recent and dramatic fall in gasoline prices, but what you pay at the pump isn’t the only area that’s been affected. There are some concerns about deflation, but they are mostly low at this point. However, the change in inflation last year was the smallest one that was seen in over fifty years, so deflation isn’t an impossibility.

The good news is that the drop in consumer prices wasn’t quite as high in December as the economists thought it would be. That doesn’t mean that the economy is recovering, but it does indicate that it may be closer to reaching the bottom. At that point it may stagnate for a while, but ultimately it will have to go back up.

Consumers had more spending power because of the lack of inflation, so the current economic crisis could actually be made worse if inflation had been on top of it. If deflation occurs it can be just as bad if not worse. Prices will fall, but so will buying power and confidence, and this kind of problem hasn’t been seen since the great depression.