Deflationary pressures?

Louis Proyect lnp3 at
Sun Jan 19 11:06:05 MST 2003

NY Times Business Section, Jan. 19, 2003
A Sinking Feeling at the Register

ONE year ago, a 50-inch Hitachi television cost $1,400 at Circuit City. It 
costs $1,000 today.

Five years ago, automakers charged $25,500 for the average new vehicle. 
They charge about $24,500 today.

A decade ago, a round trip on Delta Air Lines between New York and San 
Francisco cost $388 — and it was part of a sale. Delta now sells the same 
advance-purchase ticket for $317.

Most stunning is the price path of Burger King's Whopper sandwich, which 
cost about $1.40 some 20 years ago, when the Dow Jones industrial average 
hovered around 1,000 and hourly wages were about one-half their current 
level. This weekend, a Whopper sells for 99 cents.

Deflation, a sustained decline in prices across the economy, remains merely 
a threat, with overall prices still rising mildly. For some of the nation's 
largest industries, though, falling prices are a reality. The costs of 
cars, clothing, electronics, furniture, jewelry, kitchen equipment and toys 
— indeed, of most manufactured goods — have been dropping for more than a 
year, causing turmoil for companies and their workers. Although airlines 
and fast food are among the only industries in the service sector to be 
suffering through declines, overall service prices are rising more slowly 
than they were two years ago, according to figures released last week.

"More goods are chasing less money," said Arthur J. Rolnick, research 
director at the Federal Reserve Bank of Minneapolis, "instead of more money 
chasing fewer goods."


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