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.
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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.”
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http://www.moneynews.com/Economy/Deflation-Concerns-Economy-Weakens/2013/05/05/id/502838
The year over year drop in gas prices is one of the most severe since the crisis.
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There’s a lot of talk about the Fed offsetting the fiscal drag. But falling gas prices (along with rising wages) is also a big story.
Read more: http://www.businessinsider.com/socgen-investors-are-worried-about-a-sinister-development-in-the-economy-2013-5#ixzz2SU5DGv00
Deflation, not inflation, could bedevil markets
The yield on the bellwether 10-year Treasury note dipped to a 2013 low of 1.62% Wednesday as traders’ worries turned from inflation to falling prices. The latest economic reports shows wage pressures are less than half what the Federal Reserve says is acceptable.
The reports also show evidence of an economy weakening — a hiring pullback, a drop inconstruction spending and slowing manufacturing growth, among others. And there are signs that falling prices are a risk in Europe, where most eurozone economies are in a deep recession, and in China, where a sharp slowdown in manufacturing in April reignited fears about the economic outlook.
http://www.usatoday.com/story/money/markets/2013/05/01/treasury-yields-at-new-2013-lows/2127279/
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