People are spending less amid uncertainty due to health and economic crisis
Economists warn that falling prices is bad news.
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The pStrong prices are falling in the United States as coronavirus restrictions lengthen and people spend less..
For the second consecutive month, in April there was a decrease in consumer prices, as reported on Tuesday by the Bureau of Labor Statistics (BSL, for its acronym in English). Prices fell by 0.8% on a seasonally adjusted basis, the biggest drop since December 2008.
It is an alarming drop, indicates CNN, which has been mainly influenced by the decrease in the value of gasoline and energy. But, even removing energy and food, the drop was still 0.4%. That’s him largest monthly decline in the so-called basic consumer price index since BLS began tracking data in 1957.
Although the price drop may seem a positive thing, economists agree that deflation (the opposite of inflation) is bad news.
When prices drop because people are not buying, the time may come when entrepreneurs do not have enough profits to continue manufacturing their products. Therefore, they stop doing it and fire their workers. This can become a vicious circle since, the more people are unemployed, the more consumption will decrease.
The aforementioned chain clarifies that deflation has not yet arrived as prices have fallen by 0.3% in the last 12 months. But if measures to reduce the impact of the health crisis continues, the price drop could cause further damage.