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Sony and Samsung Gear Up for 'Miserable' Deflationary Price War

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TVs are about to get cheaper.

So reports Bloomberg, noting that Sony and Samsung now face the prospect of a ‘miserable’ Christmas amid an all-out price war. In fact, forecasts from the world’s four largest TV makers signal that the industry won’t capitalize on the biggest sales quarter of the year. Analysts predict price declines of as much as 25% in 2010.

It isn’t just televisions falling in price, either.

More generally, retailers are sweetening discounts ahead of Christmas in order to move merchandise off the shelves as their would-be customers struggle with high employment and depressed housing prices. Target, the second biggest retailer behind Wal-Mart, has said it’s going to lower prices on more than 1,000 toys. Wal-Mart has responded with its own discounts.

Little wonder then, given these headlines, that some strategists maintain that deflation, not inflation, is the primary risk looking ahead. Deflation refers to a persistent drop in prices that’s potentially dangerous, in part, as your family and friends put off purchases as they expect prices at the mall to keep right on free-falling.

Notwithstanding the boom in commodity markets, and heightened inflation expectations in the TIPS market, the economic data still support the overall notion of deflationary momentum, says Gluskin Sheff’s David Rosenberg in his latest missive.

As evidence, the economist and strategist emphasizes that the personal consumption expenditure price index, excluding food and energy, clocked in at a tepid 0.8% annual rate last quarter and this took the year-over-year trend down to +1.3% from +1.7% at the turn of the year. (The PCE core number is the Fed’s preferred measure of inflation).
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