NCPA - National Center for Policy Analysis

Suddenly Prices Are Tumbling

November 9, 2001

Economists are reporting that prices are plummeting -- in some cases faster than they have in 50 years.

  • Energy prices have led the way -- with oil dropping from its peak of $34 a barrel to $21.17 on Thursday.
  • The U.S. import price index fell 2.4 percent in October -- the largest decline since the government began collecting the figures in 1989.
  • A gauge of prices paid for materials by the nation's factories fell to its lowest level since 1949.
  • The Agriculture Department's index of prices received by farmers has recorded its biggest monthly drop in 26 years.

Then major commodity indexes recorded declines not seen since the 1950s and the 1960s, experts report.

In times of falling prices, consumers can slow their spending. They reason that there is no rush to buy an item if they can get it more cheaply by waiting a few months.

While the process could lead to a vicious spiral, economists view that as highly unlikely. Many of them predict a rebound by next spring.

Source: George Hager, "Prices Sink in Wake of Attacks," USA Today, November 9, 2001.

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