China's Rapid Deflation Spurs Economic Concerns as Falling Prices Stifle Growth

• Falling prices (deflation) can destroy an economy by discouraging spending • Deflation is rampant in China, with prices falling at the fastest rate in 15 years • Falling prices may sound good, but lead to consumers delaying purchases expecting lower prices • This causes pullbacks in spending that prompt recessions and job losses • Fighting deflation is difficult for central banks as there are limits to how far interest rates can be cut