Spain’s Falling Prices Fuel Deflation Fears in Europe |

Spain’s Falling Prices Fuel Deflation Fears in Europe

VALENCIA, Spain — Faced with plunging orders, merchants across this recession-wracked country are starting to do something that many of them have never done: cut retail prices.

Prices dipped everywhere, from restaurants and fashion retailers to pharmacies and supermarkets in March. Hoping to increase sales, Fernando Maestre reduced prices by a third on the video intercoms his company makes for homes and apartment buildings. But that has not helped, so, along with many other Spanish employers, he is continuing to fire workers.

The nation’s jobless rate, already a painful 15.5 percent, could soon reach 20 percent, a troubling number for a major industrialized country.

With the combination of rising unemployment and falling prices, economists fear Spain may be in the early grip of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year.

http://www.nytimes.com/2009/04/21/business/global/21deflate.html?hpw=&pagewanted=print

Last 5 posts by MacroMan

Thiel: Still heading toward deflationary endgame - August 4th, 2010
Around the markets in 6 charts or less - May 6th, 2010
Quotable - May 5th, 2010
Quoteable - April 29th, 2010
Pimco Warns of Deflation Risk as Central Banks to Cool Stimulus - April 21st, 2010