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For people who always like to have something to worry about, here's the trendy new worry for 1998: Price deflation.

What would happen to businesses, jobs and the stock market if average consumer prices dropped?

The answer: Things could be just fine. Obsessive brooders should exercise their worry beads on something else.

The consumer price index falls when enough businesses cut the prices on things they sell, or when prices decline sharply for a couple of major items within the index.

The 12-month inflation rate is currently running at 1.8 percent. Prices rose modestly for most goods and services, but energy and automobiles showed declines.

This kind of selective price-cutting goes on all the time without hurting the economy, says Irwin Kellner, president of Kellner Economic Advisers in Port Washington, N.Y. Think how much less you're paying these days for computers, electronics, tourist airline tickets, bank loans and long-distance telephone calls. And all this time, business profits have soared.

At the wholesale level, deflation is upon us. Prices dropped 0.6 percent in the 12 months ending November -- the largest drop since 1987. Yet producers of wholesale goods aren't down in the mouth.

Sometimes falling prices do indeed squeeze profits -- as when retailers have to cut prices more than originally planned during a slow Christmas selling season.

But generally speaking, businesses can reduce retail prices with no decline in profit margins, if they're also cutting costs -- for example, by buying raw materials at a lower wholesale price.

Value-conscious consumers often flock to lower-priced goods, so profits rise. Rapid sales may lead businesses to hire at a faster pace.

Consumers are indisputably better off when prices fall. They can buy more for every dollar they earn -- and right now, real hourly earnings are rising at the fastest rate since 1978, Kellner says. Americans' fear of deflation was formed by the Great Depression. Consumer prices dropped from 1927 through 1933, and again in 1938-39. But falling prices were a symptom of that national tragedy, not a cause. The cause was a bad combination of economic policies: a shrinking money supply, restrictive fiscal policies aimed at balancing the budget and import restrictions which caused other countries to retaliate.

Currently, however, the money supply is rising and global trade expanding. So depression worries also ought to be put aside.

Under mild deflation, stock prices have historically done just fine, says Steve Leuthold of the Leuthold Group in Minneapolis. Here's how the market has behaved during various "flationary" periods since 1872:

The best of all possible environments for stocks is price stability or mild inflation -- consumer-price gains of 0.1 percent to 1 percent a year, Leuthold says. We've had 12 of those lucky years. During them, stocks returned an average of 20.7 percent.

The second-best environment is the current one, with inflation at roughly 2 percent to 3 percent. Such years (28 of them) produced a 17 percent average total return.

We've had 24 years of modest deflation, with the consumer prices running at zero to minus 2.5 percent. During those periods, stocks averaged gains 13.8 percent. Americans last saw price deflation in 1955, when the CPI dropped 0.4 percent. That year, stocks gained 31.5 percent, counting dividends and capital gains. (But in the 12 months ending in June 1949, prices dropped 0.1 percent and stocks lost 9.5 percent.)

Stocks have tended to get trashed if mild deflation turns into something worse, especially when a recession is going on. Stocks also got trashed in the 16 years when price inflation rose more than 7 percent. Stocks like stability. They hate extremes.

What about the transition from inflation to deflation? Since 1872, there have been 11 such years. On average, stocks did extremely well -- up 17 percent.

So deflation alone shouldn't spook stock investors today, Leuthold says. The high valuations that stocks currently carry spook him much more.

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