No need to feel down about deflation…yet
New figures out show that inflation has dropped so far, we’re now into ‘deflation’ or negative inflation.
According to the Office for National Statistics (ONS), inflation fell to -0.1% in April; the first time it has been so low since 1960 – basically meaning prices have fallen compared with this time last year.
One way of looking at it is to compare a shopping trolley of goods. If it cost £100 last April, it will now only cost £99.90.
Falls in air and sea fares, partly fuelled by oil price drops, as well as supermarket ‘store wars’ have helped drive prices down.
All good news? Certainly in the short term for the cost of living, although economists become nervous about sustained negative inflation as they believe it can place a choke hold on the economy.
Some analysts fear that households and businesses may defer spending in the hope of getting better deals by waiting but this can lead to a viscous circle with reduced spending and slower order books.
However, to paraphrase, what goes down must go up – certainly when it comes to prices.
The Bank of England governor Mark Carney and experts mostly agree that inflation will remain low over the coming months but will rise towards 2%in the latter half of the year.
Oil prices – and the cost a the fuel pump – have already started to rebound, so make the most of it while it lasts – it may not be here for long!
New figures out show that inflation has dropped so far, we’re now into ‘deflation’ or negative inflation. According to the…