Stiglitz says deflation still a risk

NEW YORK, Oct. 20 (UPI) -- U.S. economist Joseph Stiglitz, a Nobel laureate, says the risk of deflation is still a concern, despite signs of an economic recovery.

"I think we're on the verge," Stiglitz said referring to prices headed lower, which stalls the economy as consumers hold off on spending, expecting a better price if they wait to make purchases.

Most economists disagree, USA Today reported Tuesday.

Wages, however, have fallen 1.9 percent since December. Rising wages are a key factor in inflation, as more available money gives sellers implied permission to raise prices. But wages are not likely to rise amidst rising unemployment, which allows employers to keep wages low.

Unemployment, at a 26-year high of 9.8 percent, is expected to rise further.

The Bureau of Labor Statistics said the consumer price index rose 0.2 percent in September compared with August. Housing rents dropped 0.1 percent and the CPI has fallen 1.3 percent from 2008.

U.S. factories are operating at 65 percent of full capacity, another deflation risk as manufacturers tend to lower prices to increase demand and boost productivity.

There is also an over-supply of homes on the market, which brings home prices down, Stiglitz said.