You're thinking, "Good! I can buy more stuff with less money!" This is true, but the problem is that if everyone can buy more stuff with less money — what motivation is there to manufacture more stuff? Ah-ha. Troubling, isn't it?

From the NYT:

“We’re looking at a pretty deep recession now,” Mr. Behravesh said. “ All of a sudden, any pricing power that companies might have had is gone. You’re going to see discounting like crazy going on. All kinds of sales. You’re going to see all kinds of prices being slashed.”

With consumers pulling back, many analysts are expecting a difficult Christmas shopping season. Retail sales, for example, were down 2.8 percent in October from September, and 4.1 percent from October 2007 as consumers pared their spending.

In Wednesday’s report, even excluding volatile food and energy prices, prices dropped 0.1 percent in October. It was the first such decline in more than two decades and raises the specter of deflation as the economy contracts and demand for goods and services across the board plunges.

“This month it’s more than slowing, it’s outright contraction,” Mr. O’Sullivan said. “And yes, if you extrapolate that, it’s deflation.”

For those of you wondering what deflation is — you can click here for a bleak explanation.

Consumer Prices Fall by Record Amount [NYTimes]
(Photo: Ben Popken )

The Times graph, a form of Voronoi Treemap, divides consumer spending into numerous categories and subcategories, allowing you to see what percentage of an average consumer's spending is used for food versus transportation, or on citrus fruit versus tires. Some interesting highlights:

• Electronics took the biggest dip in prices. From March 2007 to March 2008, TVs dropped 18.3% and computers dropped 12%.
• Not surprisingly, the biggest price increases were in fuel: Gas went up 26%, propane and firewood went up 23.4%, and fuel oil (for home heating) went up 48.4%.
• The only non-fuel item that increased by more than 20% was eggs, which went up 29.9%.
• Consumers spend the same amount on "alcohol away from home" (0.5%) as they do on health insurance.
• We spend too much damn money on fast food. The only categories where we spend more money are rent, gas, electricity, new cars, and meals at non-fast food restaurants. Yes, this is because other categories like groceries are subdivided into produce and meat and so on, but 2.4% is still a sizable chunk of spending.

All of Inflation's Little Parts [NYT]
(Photo: =Rah=)

Bloomberg forecast only .3%. Ha! What does that punter know.

In the closeup section we saw food and energy rose sharply last month, like our vocal octave upon seeing Secretary of Labor, Elaine L. Chao (pictured, swoon!), while the rest of the basket rose more gently.

But what's in Ms. January's future? Turn-ons, offs? Information was scarce but we found that while not indicative of inflation, some analysts, according to the New York Times, think the Fed will still raise interest rates a touch more to throttle economic growth.

Party poopers.

Pictured is Secretary of Labor, Elaine L. Chao, who is likewise reportedly, "totally stoked to be dropping mad economic science on the streets."

Bloomberg estimates a .5% increase in the C.P.I., which measures urban price changes in a core "basket" of goods: Housing 42%; Food 18%; Transportation 17%; Medical Care 6%; Apparel 6%; Entertainment 4%; Other 7%.

Here's hoping your wages got at least .5% increase this year, too. Salut, oh C.P.I, you indefatigable bastard.