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Wednesday 25th of February 2009
February 23, 2009

US moves away from deflation


by Kay Murchie
”US

Figures released by the US Labor Department revealed a slight rise in US consumer prices as energy prices increased.

According to the Labor Department, the Consumer Price Index rose 0.3% - the first rise in six months, following a fall of 0.8% in December.

The rise is seen as positive by many analysts who have been worrying about the world’s largest economy entering a period of prolonged inflation, which would could deepen a recession.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Terry Morris, senior equity manager at National Penn Investors Trust Company, said “I guess if anything, it’s good news that it ticked up and that we’re pointing away from deflation.”

However, many economists believe prices may fall in the coming months, bringing with the threat of deflation once again.

In January, energy prices rose, primarily driven by petrol prices, however, they are down 20.4% when compared with January last year.

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