CPI Falls to 0.5%

Generali

chucknorris wrote: »

I thought this explanation seemed to make sense, in which they are saying the current situation is good for the UK but not so good for mainland Europe:


http://www.cityam.com/207074/inflation-has-fallen-below-target-should-uk-be-worried


The Eurozone’s deflation is primarily the bad kind caused by weak spending. Spending in the UK has been stronger. Inflation in the UK is instead being driven down by oil prices which are diving due to a global supply glut.
“Low inflation driven by cheaper petrol, food and import costs is unambiguously a positive for the UK. It represents a big tax cut for consumers, who will be seeing real average earnings growth in excess of 1.5 per cent year-on-year within a couple of months,” said Rob Wood, economist at Berenberg investment bank.

TBH I see this as good for mainland Europe too. Yes it makes the headline change in the cost of living into a bigger minus number but most countries in Europe are net oil importers and so will gain from the drop in the price of oil.

This doesn't make the problems Europe faces go away but it helps stretched household budgets go a little further at little or no cost to European companies or Governments.

chucknorris

Generali wrote: »

TBH I see this as good for mainland Europe too. Yes it makes the headline change in the cost of living into a bigger minus number but most countries in Europe are net oil importers and so will gain from the drop in the price of oil.

This doesn't make the problems Europe faces go away but it helps stretched household budgets go a little further at little or no cost to European companies or Governments.

I did wonder if cheap oil for the UK is so good, surely it must at least be mitigating other bad data in Europe.

Generali

chucknorris wrote: »

I did wonder if cheap oil for the UK is so good, surely it must at least be mitigating other bad data in Europe.

There is a commonly held belief that falling prices are always bad for an economy and it ain't necessarily so.

If oil prices fall then consumers have more money to spend, Government budgets will go further and company costs are lower. If non-oil prices are falling then that means companies will get lower revenues which does cause the problems we associate with deflation but the oil price causing prices on average to fall isn't a bad thing unless you are selling oil.

I don't think I'm phrasing this very well (painkillers, gah). I will try to post something tomorrow.

chucknorris

Generali wrote: »

There is a commonly held belief that falling prices are always bad for an economy and it ain't necessarily so.

If oil prices fall then consumers have more money to spend, Government budgets will go further and company costs are lower. If non-oil prices are falling then that means companies will get lower revenues which does cause the problems we associate with deflation but the oil price causing prices on average to fall isn't a bad thing unless you are selling oil.

I don't think I'm phrasing this very well (painkillers, gah). I will try to post something tomorrow.

What you are saying makes sense, and is perfectly clear. It does seem as if the UK is having it both ways at the moment.


Although it is hitting my ftse 100 tracker quite hard, but it also seems to be prolonging low interest rates, at a push I would rather have that. I do realise of course that we have to recover properly at some stage, and interest rates should eventually go back up (so I can't have it both ways).

Generali

chucknorris wrote: »

What you are saying makes sense, and is perfectly clear. It does seem as if the UK is having it both ways at the moment.


Although it is hitting my ftse 100 tracker quite hard, but it also seems to be prolonging low interest rates, at a push I would rather have that. I do realise of course that we have to recover properly at some stage, and interest rates should eventually go back up (so I can't have it both ways).

I've lost track a bit but I suspect that the FTSE100 is pretty heavy with oilies and miners. The 350 even more so as I understand that there was a lot of issuance from Russian commodities firms (please let me know if this is not the case).

How we unwind from ZIRP and QE is anyone's guess quite frankly. Everyone said that rates would rise in 2014 yet bond prices are moving ever higher: you now pay for the privilege of lending money to both the Swiss and Japanese Governments!

chucknorris

Generali wrote: »

I've lost track a bit but I suspect that the FTSE100 is pretty heavy with oilies and miners. The 350 even more so as I understand that there was a lot of issuance from Russian commodities firms (please let me know if this is not the case).

How we unwind from ZIRP and QE is anyone's guess quite frankly. Everyone said that rates would rise in 2014 yet bond prices are moving ever higher: you now pay for the privilege of lending money to both the Swiss and Japanese Governments!

Yeah I think that the ftse 100 is about 40% weighted with oilies, miners and banks, so can be quite volatile. I don't know much about the ftse 350.

Thrugelmir

chucknorris wrote: »

Although it is hitting my ftse 100 tracker quite hard, but it also seems to be prolonging low interest rates, at a push I would rather have that. I do realise of course that we have to recover properly at some stage, and interest rates should eventually go back up (so I can't have it both ways).

Investors have been pushing the markets upwards chasing yield. If you actually look at the underlying trading performance of many companies it didn't equate to such valuations. The decline of the supermarkets is a clear example of the exploitation of consumers in the UK. Downward pressure on one sector will spin off onto others. As cost saving measures become the order of the day. Seems as if we are entering a period of uncertainty.

OPEC should be renamed NOPEC. The old cartel holding oil and gas prices up has been broken. Possibly permanently. New rules. New game.

Spotting the right opportunities is the name of the game.

chucknorris

Thrugelmir wrote: »

Spotting the right opportunities is the name of the game.

That's exactly what I believe too and why I invested in property decades ago. Over the long term I'm not as pessimistic about the indexes as you are, your entitled to your pessimism of course, but then I'm entitled to be optimistic too.


I've always thought that the real way to make money is in your own business rather than someone else's (that includes both investment and employment). But these days I'm more interested in enjoying life and avoiding excess risk, to consolidate what I have rather than make more.

mystic_trev

How true! :rotfl:

purch

There is a lot of nonsense spoken about both Inflation and Deflation.

As long as people keep buying stuff then the game can continue.