One good thing about a recession? Things are cheaper to buy. The other day, I bought a new sweater for $.98. Now, deflation has made cars cheaper to buy, too. Prices for used cars and trucks were down 5.4% since last August, according to the Bureau of Labor Statistics (BLS).
Overall, the Consumer Price Index (CPI) was down 1.5% since last year, largely due to a 30% drop in gas prices. Unfortunately, though, food (up .5%) and health care (up 3.7%) costs continue to rise at a time when you can least afford it, causing mild inflation in the things you need the most. (Source: BLS Consumer Price Index: August 2009)
What It Means to You
Lower oil prices and transportation costs have not been translated into lower prices overall. This means you feel the impact of higher prices in some areas, even though the economy is in a deflationary period.
In other words, you are experiencing what I call de-inflation - inflation and deflation at the same time. This is different from 1970's-style stagflation, which was massive inflation for everything despite slow economic growth.
- Deflation Greatest Threat to Economy Right Now
- How Does Inflation Affect My Life?
- Could Stagflation Reoccur?
(Photo Credit: Bill Pugliano /Getty Images)