Economics
How Deflation Is Actually Lifting European Economies
Conventional economic wisdom is that deflation will lead people to spend less. European consumers are doing the opposite
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Europeans have been warned for more than a year that an ogre called deflation is stalking their economies. Now the ogre has arrived, and guess what? It's stimulating growth.
The danger of deflation, economists will tell you, is that when prices start falling, consumers curb their spending in anticipation of even lower prices. (Why buy a car now if it might cost less a month from now?) That can send an economy into a downward spiral, as reduced consumer demand leads to lower production and in turn to job losses that drag down consumer spending even more.