NRG Energy Inc., a power producer, plans to postpone spending $900 million on electricity generators next year to try to support its debt rating.
Cheap goods are great news when economic demand is relatively strong; but economists fret about falling prices because entrenched deflation can prompt businesses and consumers to postpone spending – hoping prices have farther to fall – and blunt policymakers' standard tool of interest rate cuts.
Consumers cannot keep extra plumbers' visits on hand or postpone spending on child care.
Trade unions called on the government this month to increase taxes on the highest earners and postpone spending cuts, while industry groups urged a reduction in public-sector spending.
Under this bullish alternative, he said, the lame-duck Congress finds a way to postpone spending cuts for at least a couple of quarters.
While in opposition he repeatedly criticized Gordon Brown, the former prime minister, for postponing spending cuts until the economy had fully recovered.
The British chancellor of the Exchequer, George Osborne, said at a party conference Monday that postponing spending cuts and tax increases was not an option.
It could involve something as innocuous as postponing spending on research and development in order to avoid reporting a loss in the current quarter.
Falling prices encourage consumers to postpone spending in the expectation of cheaper goods tomorrow; they also make it impossible to deliver negative real interest rates if these are needed to drag an economy out of recession.
In turn, this uncertainty leads them to postpone spending on investment and consumption goods and to slow hiring, impeding the recovery," a group of professors from Stanford University and the University of Chicago wrote in a study that found "current levels of economic policy uncertainty are at extremely elevated levels compared to recent history".
