But despite the falling prices of many items, from houses to oil and stocks, very few people are buying.

The US labour department said on Wednesday that its consumer price index (CPI) fell by one per cent in October, the biggest drop since the department began releasing data in February 1947 and worse than analysts' expectations.

The record plunge followed little change in prices in September and August and was led by oil prices plummeting from their record highs in July.

Prices slashed

Big high street retailers in many countries have started slashing prices as Christmas approaches in an attempt to entice shoppers who have been keeping their hands in their pockets.

"Unemployment is rising, household wealth is falling, and credit conditions are tight," Moody's economic analysts said. "Squeezed from all sides, consumers are being frugal."

Juliette Saly, a market analyst at Australia's Commsec, told Al Jazeera that investors were not even getting into the stock market to pick up the bargains as prices drop.

"A lot of people seeing value disappearing pretty much overnight, so they're not even really tempted to go in and buy some of these stocks which look very very cheap," she said.

"In fact on our share market we've seen a fifty per cent drop in value over the past year."

Exports fall

Japan reported on Thursday that its exports had fallen at the fastest pace in almost seven years as demand in China, the US and Europe had dropped, causing it to post its second trade deficit in three months.

"Squeezed from all sides, consumers are being frugal"

Moody's economic analysts

The announcement came just days after confirmation that the Asian powershouse had fallen into recession as major manufacturers cut production because of falling global demand.

"This deteriorates the outlook even more, what's driving the economy is exports," Martin Schulz, an economist at the Fujitsu Research Institute, said.

The government figures showed that the electronics industry and car manufacturers had been particularly badly hit.

After other production cuts by Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co, Isuzu said on Thursday that it would axe 1,400 contract workers as it lowers its lorry output for this fiscal year.

Car manufacturers

Car makers have been hit across the world with the big three US manufacturers appearing before the US senate banking committee on Tuesday to request a portion of the $700bn financial bailout agreed by US politicians last month.

US Democrats have been pushing for funding from the bailout to be granted to the auto industry, but so far Republicans in congress and White House officials have resisted the calls.

In France, car manufacturer PSA Peugeot Citroen said it would cut 2,700 jobs.

While falling prices across the board could benefit consumers, analysts have warned they could hurt corporate profits and cause deflation, a prolonged bout of falling prices that has not been experienced in the US since the Great Depression in the 1930s.

Deflation could stifle growth prolonging the economic downturn.