Deflation could slow U.S. economy further

NEW YORK, Dec. 3 (UPI) -- U.S. shoppers and economists see price declines in different shades of alarm but many worry falling prices could put brakes on an already slow economy.

The primary reason economists say deflation hurts the economy: Consumers hesitate.

With prices falling, "I do a lot more comparison shopping," San Diego bargain hunter Loralisa Gainsborough, told USA Today.

Deflation's effect could also be measured by Costco Wholesale's TV sales in October, the newspaper said.

The company sold 20 percent more TVs in October 2008 than it sold in October 2007 but revenues on TV sales dropped due to lower prices.

Commodity prices, which tend to drive inflation, are also behind the current cycle of falling prices.

Crude oil prices have dropped 68 percent from July, while wheat prices have fallen 60 percent from earlier this year. Home prices have dropped 21 percent from 2006 prices, the newspaper said.

Nouriel Roubini of Stern School of Business at New York University predicted "stag-deflation" could set in, describing a recession combined with deflation.

Jeremy Melnick, a partner at Gordon's Ace Hardware in Chicago said customers had switched from "replace to repair."

"It's obviously scary times for everybody," he said.