In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when inflation declines to lower levels). Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.
Economists generally believe that deflation is a problem in a modern economy because they believe it may lead to a deflationary spiral.
Historically not all episodes of deflation correspond with periods of poor economic growth. Deflation occurred in the U.S. during most the 19th century (the most important exception was during the Civil War). This deflation was caused by technological progress that created significant economic growth.
Read more about Deflation: Causes and Corresponding Types, Effects, Deflationary Spiral, Counteracting Deflation