Deflation requires a falling broad index over the comparison period. A cheaper computer, seasonal gasoline decline, or one month's category movement does not establish general deflation.
The effects depend on expectations, wages, nominal debts, interest rates, contracts, output, and policy response. Lower prices can increase purchasing power for some buyers while unexpected deflation raises real debt burdens and interacts with weak demand. The sign alone is not a welfare verdict.
Deflation can occur with recession, but neither logically requires the other. Name index, scope, period, adjustment, and vintage before classification.
Test the sign on one aligned series
If the same broad index falls from 125 to 123, the rate is (123 - 125) / 125, or -1.6%. That supports a deflation statement for the named index and interval. It does not show that every price fell. The BLS CPI FAQ describes CPI's population and item coverage. Preserve seasonal-adjustment status and release vintage, and keep the measured price change separate from any claim about recession, debt distress, cause, or preferred policy.
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Analyze this concept
- Classify a negative broad-index change as deflation and distinguish it from one falling price, low inflation, disinflation, recession, and an automatic welfare conclusion.
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Build on these ideas
- Inflation — Analyze
To analyze this concept: Required. Deflation is the negative direction of the same rate concept.