High inflation for consumer prices is almost always a threat to growth but deflation is not.

For the eight centuries beginning in 1210, the world's average annual inflation rate was only 1%, according to the Global Financial Database.  For  most of that period, however, the long-term 1% average concealed sharp swings between inflation and deflation.

In early 1930s, deflation disappeared, for reasons that remain mysterious but include the spread of the banking industry and the wider availability of credit, with consequently more money chasing the available goods.

The end of the gold standard in the 1970s made it easier for central banks to print money, which also tends to fuel inflation.

The result was that deflation disappeared completely on the global level, and bouts of deflation - particularly longer ones - became much less common within individual nations as well.  

Though deflation has largely vanished, worldwide, it continues to surface in isolated pockets.  

Japan is the only major country to have suffered a multiyear case of deflation in the postwar era, but many countries have suffered a single-year bout.  

Again, however, these periods did not have a consistent impact on growth, for better or worse.

No clear evidence that consumer price deflation is bad - or good- for economic growth.

In early 2015, the Bank for International Settlements (BIS) looked at the postwar record for 38 countries.  In all, these countries had seen more than 100 years in which prices fell.  

• On average, GDP growth was higher by a statistically insignificant margin during deflationary years, at 3.2%, than during inflationary years, at 2.7%.   
• The cases in which deflation was accompanied by strong growth occurred from Thailand and China to the Netherlands and Japan.  

The BIS concluded there is no clear evidence that consumer price deflation is bad - or good- for economic growth.

High inflation for consumer prices is almost always a threat to growth but deflation is not.

How can you tell when consumer price deflation is the good kind, driven by growing supply, or the bad kind, driven by shrinking demand?  

This task requires parsing conflicting forces of supply and demand, often with unclear results.  

The takeaway is simply that while many analysts now assume that any hint of deflation is worrisome, this assumption is not borne out by the evidence.  

High inflation for consumer prices is almost always a threat to growth but deflation is not.