Lower Prices:

Good News, Bad News

1% drop in month may entice some shoppers with discounts, but it signals overall declining business for retailers, industry

"The real danger ... is when prices start falling, it has a strong effect on buyers," McMillion said. "Nobody wants to buy when if they wait another week, prices will be lower. That's a concern that retailers have to struggle with now. Apparel retailers are discounting early for the holiday season, but now they've built these expectations into their customers. If you wait a little longer, it'll be cheaper. That undermines their sales today and sales for the future."

Wal-Mart, for instance, slashed toy prices well before Halloween, while Target said this week that it would match Wal-Mart prices on identical items in local markets.

Earlier this month, supermarket chain Wegmans announced that it would cut prices on bakery, meat, produce and deli items in hopes that its costs would fall in the near future.

Wegmans, like other grocery stores, locked into contracts for fuel and other items, such as wheat, corn and soybeans because it feared prices would climb higher. But since fuel and other prices are falling, "it was clear consumers ... expected to see prices come down," said spokesman Jo Natale.

Yesterday's data on falling consumer prices was a positive sign that Wegmans made the right bet, she said.

Sun reporter Nick Madigan and the Associated Press contributed to this article.