Consumer prices have fallen 2.1% over the past year, the biggest year-over-year decline in 59 years, the Labor Department announced today. Though the Consumer Price Index was unchanged from June to July, it was drastically lower than in July 2008, when oil peaked at $147 a barrel and gas cost $4.11 per gallon, the Washington Post reports. Economists fear dropping prices are a sign of deflation.
Deflation can be even more dangerous than inflation, because falling prices often bring wages down with them, creating a vicious downward spiral. The slackening of the domestic economy reflects a worldwide slowdown, the New York Times reports. "The inflation story was nonsense in an environment where you have such wild excess capacity globally," says an economist. "I think inflation is below 2% for the next 2 years."