It’s not just share prices that are falling. This week’s release of monthly inflation data confirmed that UK consumer prices fell in October at their fastest since the adoption of the CPI index 11 years ago. Gordon Brown echoed the Bank of England in warning that deflation now poses the greatest threat to the UK economy. The emerging consensus among economists is that October’s drop in inflation is just the first step alonga road that is likely to end in the first bout of delation in the UK for almost half a century.

Given that investors have spent much of this year fretting about the impact of rising inpuct costs on corporate profits - fuel for airlines, energy for manufacturers, agricultural commodities for food producers - should they not join consumers in welcoming this phenomenon?

The short answer is no - in that it is difficult to identify corners of the stockmarket that will actually benefit from deflation. For supermarkets, for example, food price inflation has been a core component of their like-for-like sales growth. Clothing retailers are more accustomed to coping with deflation: whether in clothing or big-ticket electrical goods. However, the concern now must be currency-related: that they face a squeeze on margins from a combination of falling prices and a weakened sterling, which has increased the cost of the goods they source overseas - especially from Asia.

Nor is the impact confined to consumer industries. Any companies which hold high levels of stocks are faced with falls in the value of their inventory - a problem especially acute among oil producers. Even safe-haven utilities such as water companies will in theory suffer: lower inflation assumptions feed through into a reduction in the value of their regulated assets - whose revenues are index-linked.

The other consideration must be the pain to highly-indebted companies: just as inflation usefully erodes the value of corporate borrowings, so deflation makes that burden relatively worse. This might be most acute among pub companies, where high financial leverage is common.

Of course, much depends upon the composition of a company’s debt: those with a high proportion of floating rate borrowings will benefit from falling base rates and the recent drop in Libor.

And the potential winners? Bus and train operators, at a stretch. As yesterday’s rail fare increases demonstrate, they are able to set next year’s fares based on historic levels of inflation - specifically, the July reading of CPI. That means train operators are able to raise next year’s fares by 7 per cent. Then there are those sectors that have historically enjoyed strong pricing power: cigarette makers, for example.

Perhaps the only clear deflation winners are companies with large pension liabilities, who, based on the actuarial assumptions on which that burden is calculated (principally discount rates), should see a narrowing of their scheme deficits.

Helpful, certainly, but not enough of a consideration in itself to tempt reluctant investors back into shares.

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