Deflation, But Not Today
Data today shows that the UK escaped slipping into deflationary mode for the first time in my lifetime by a whisker.
The last time the UK experienced deflation was in 1960 when:
Figures today from the the Office for National Statistics show that the RPI fell to a flat 0.0 per cent in February. Analysts had been expecting a figure of -0.5 to -0.7 percent.
It seems that today's figures are merely putting off the inevitable for another month. The Telegraph today is quoting a Deutsche Bank economist who is forecasting the RPI to drop to -4 percent this summer.
Deflation is defined as a sustained period of falling prices. It discourages consumer spending because shoppers think why buy today when things will be cheaper tomorrow?
The spin-off from that is slow economic growth, a further contraction in manufacturing leading to pay freezes and higher unemployment.
The RPI is also used to set the level of things like state pensions & other welfare benefits and also index-linked government bonds.
If the RPI slips into negative territory next month, the value of these things will fall relative to the value of public debt, effectively increasing debt burden.
The last time the UK experienced deflation was in 1960 when:
- Harold Macmillan was prime minister
- Elvis Presley was discharged from the United States Army
- Cassius Clay won his first professional fight
- The farthing was still legal tender
- Burnley were the kings of English football
- Jonathan Ross was in the shit for the first time (yes I've Googled it - 17 November 1960)
Figures today from the the Office for National Statistics show that the RPI fell to a flat 0.0 per cent in February. Analysts had been expecting a figure of -0.5 to -0.7 percent.
It seems that today's figures are merely putting off the inevitable for another month. The Telegraph today is quoting a Deutsche Bank economist who is forecasting the RPI to drop to -4 percent this summer.
Deflation is defined as a sustained period of falling prices. It discourages consumer spending because shoppers think why buy today when things will be cheaper tomorrow?
The spin-off from that is slow economic growth, a further contraction in manufacturing leading to pay freezes and higher unemployment.
The RPI is also used to set the level of things like state pensions & other welfare benefits and also index-linked government bonds.
If the RPI slips into negative territory next month, the value of these things will fall relative to the value of public debt, effectively increasing debt burden.