The acceleration of the economy to its fastest pace of growth in more than two years masked a slide in prices of goods and services that threatens to temper the recovery.
The domestic demand deflator, a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed Monday. At the same time, gross domestic product growth jumped to an annualized 4.8 percent, the most since early 2007.
Sustained price declines threaten to curtail a corporate profit rebound that's already been insufficient to spur a stock market rally this quarter. The report prompted Deputy Prime Minister Naoto Kan to say the government may outline an emergency-spending package, adding, "I'm concerned we're entering into a deflationary situation."
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