Demand destruction is deflationary. I worked for a builder in the early 80's when mortgage rates high 21.5%. We can live with high rates if you have demand.
The Baltic Dry Shipping Index would argue in favor of DEFLATION. It has dropped 65% in the last 3 weeks alone. http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
Last year a packet of top ramen was 12 cents in my local grocery store. now its 17 cents. Poor college students...how will they survive? On the other hand Maruchan Ramen is still only 14 cents a packet (up from 10 cents a year ago) (for those of you that dont know Maruchan Ramen is the "generic non name brand" type of Top Ramen)
This is actually something that may cause inflation due to shortages. Agents and importers are unable to get credit to ship goods so it is sending the shipping rates way down. The inflationary part for us is any commodity that is heavily imported may come in short supply soon.