New York ? Jakki Glivicky can easily list some of the bargains she’s nabbed recently: two sweaters, a pair of pants and a skirt for a total of $200; a couple of CDs at $11 each, marked down from $15; and a Bulova watch for $200, discounted at least 30 percent.

She even picked up a Canon Elph digital camera for $399. Only three years ago, the average price for a similar gadget was more than $600.

“I definitely get a lot more for my money now,” the Boston resident said.

Glivicky and other consumers are clearly enjoying the deep discounts in stores across the country, but the falling prices are causing great pain for the retail industry. Although overall consumer prices are rising modestly, many categories of goods, from toys and televisions to computers, apparel and autos, have been victims of deflation for more than a year.

At L.L. Bean Inc., men’s cotton polo shirts are $19.50 this spring, compared with $22 a year ago. Men’s cotton sweaters are priced at $29.50; a year ago, they were $36.

Circuit City Stores Inc. is selling Kenwood home theater systems for $500; a year ago, they were $700.

While the trend is expected to ease later this year if the economy picks up and the U.S. dollar continues to lose value against foreign currencies, analysts said deflation will remain a major challenge for retailers. It also will be tough to stop.

Deflation — a sustained decline in prices in goods and services — is a vicious cycle. The current cycle was spurred by such factors as excess production capacity after the 1990s economic boom and cheaper imports. In general, it comes when a sluggish economy forces businesses to reduce prices, which prompts consumers to delay their spending because they believe even better bargains are in the offing.

That causes retailers to cut prices further to stimulate spending, which in turn hurts profits. Meanwhile, stores are under pressure to cut costs to increase profitability to offset the sales shortfall.

Mark Sandquist, an audio/video systems designer at Hifi House in Jenkintown, Pa., waits for customers. The deflationary trend is causing pain in the retailing industry. Hifi Inc. officials said the company has been forced to do more TV advertising and be more aggressive in informing consumers of the latest in technology.

After analyzing results from the holiday season, analysts believe deep discounting helped depress sales in dollar terms, but not in terms of merchandise units sold.

“People bought more stuff than people realized,” said Richard Jaffe, an analyst at UBS Warburg Securities.

The Consumer Price Index, the government’s most closely watched inflation barometer, rose by 2.4 percent in 2002, up from the 1.6 percent increase in 2001. But much of the gain came from rising energy costs.

Excluding energy prices, consumer prices rose just 1.8 percent in 2002, the smallest increase since 1964, and down from a 2.8 percent gain in 2001.

Some economists don’t believe lower prices are making consumers feel wealthier, mostly because they feel squeezed by higher energy and health care costs.

“Consumers are trapped between price cutting on one hand and price hiking on the other,” said Frank Badillo, senior retail economist at Retail Forward, a consulting firm in Columbus, Ohio.

Rachelle Pachtman, of New York, has saved money buying such items as $29 velvet dresses from catalog retailer Coldwater Creek, but she faces high medical bills for her dog.

“I think I am going to buy dog insurance,” she said.

The lack of pricing power among retailers has forced them to become even more efficient, although analysts question how much more leaner they can be.

Hifi House, which sells home theater systems and televisions, said it is under pressure to do more TV advertising.

“We are working harder because we have to sell to more people to keep the revenues up,” said Jon Robbins, chief operating officer at Hifi, based in Broomall, Pa. Traditional big-screen televisions now sell for about $1,700, down from about $2,100 a year ago, he said.