Lower prices sign of recession

November 20, 2008 5:35:08 PM PST
Some economic experts say a sure sign we are in a recession, is the decline in consumer prices.For many, lower prices is good news around the holiday shopping season, but in the longer run it could mean trouble.

A week before thanksgiving and retailers are already begging shoppers to spend money and the enticement is falling prices.

Marti Duelks of Holly Springs was doing some Christmas shopping in Cary.

"I actually just bought a pair of pants that were originally almost $60 for $20," shopper Marti Duelks said.

The deflation started with rapidly falling gas prices.

"I think it's a good thing for everybody at this point," Duelks said.

Certainly homebuyers are singing that tune as well with housing bargains being found all over the triangle for the first time in many years.

Thursday, NC State economist Michael Walden told the Raleigh Regional Association of Realtors the bad news for bargain hunters.

"It's typical when you have a recession that you get softness in prices," Walden said. "What people, of course, should not get real excited about is to think that, 'Well, gosh, if things are cheaper at the mall that's good for me.' Well, no, because if this persists likely your wages will go down too."

So when retailers and other businesses cut prices, they make less profit and have to cut costs --usually labor costs and that leads to more unemployment.

"What we see is reality and that's that everything is dropping right now," Duelks said. "So we're like 'woo hoo', you know. And then it's not what it seems to be."

But economists say deflation is also a key element in getting us out of the recession. They say eventually investors and entrepreneurs will no longer be able to resist bargains and spending will once again be on the upswing, but that could take many more months.


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