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Deflation could lead to a fall in share prices. The decrease of money in circulation on the market, the decrease of people's money income and the decrease of purchasing power will affect the price of goods. The long-term monetary tightening will restrain investment and proction, lead to the rise of unemployment rate and economic recession. The understanding of its concept is still controversial
when the consumer price index (CPI) falls for three consecutive months, it means that deflation has occurred. Deflation means that overcapacity or insufficient demand leads to the continuous decline of prices, wages, interest rates, food, energy and other prices
According to the data released by the Bureau of statistics in July 2012, CPI rose year on year in June, while the factory price of instrial procts (PPI) fell year on year, and China's economy will enter deflation (1) the price of goods generally continued to decline Second, the continuous decline of money supply Third, the effective demand is insufficient and the economy is in full recession. This view is called "three elements theory" 
extended data:
specific types
the division of deflation types is of great significance to comprehensively and accurately grasp the nature and mechanism of deflation and to find different governance countermeasures for different situations. According to different standards, deflation can be divided into different types: relative deflation and absolute deflation
relative deflation means that the price level is above zero and below the price level range suitable for a country's economic development and full employment. In this state, although the price level is still growing, it is lower than the price level required by the country's normal economic development and full employment, and the currency is relatively insufficient
this situation has begun to damage the normal economic development. Although it is slight, if we do not pay attention to it, there may be quantitative to qualitative changes, and the damage to economic development will be aggravated
absolute deflation means that the price level is below zero, that is, the price has a negative growth, which indicates that a country's currency is absolutely insufficient. The appearance of this kind of state is very easy to cause economic recession and depression. According to the degree of impact on the economy, it can be divided into mild deflation, moderate deflation and severe deflation
and the three criteria are mainly the extent and ration of absolute price decline. Generally speaking, a slight deflation occurs when prices show negative growth, but the range is not large (e.g. - 5%), and the period does not exceed two years
moderate deflation is defined as a large price decline (e.g. - 5% ~ 10%) for more than two years. Severe deflation is defined as a double-digit price decline lasting for more than two years or even longer. The deflation corresponding to the great depression in the 1930s is just like this
source: Internet - deflation