UK Heading For Deflation?

ChopperST

http://www.theguardian.com/business/2015/feb/12/uk-heading-deflation-bank-of-england-

Good kind or bad kind I wonder?

Falling energy prices and food prices can only be a good thing but will this start to affect the rest of the economy akin to the Eurozone?

Generali

2014      Monthly     Annual
Jan         0.4         0.0
Feb         0.8         1.1
Mar        -2.3        -0.3
Apr        -0.1        -0.6
May        -0.2        -0.9
Jun         0.2        -0.7
Jul         0.3        -1.0
Aug         0.4        -1.4
Sep        -0.7        -2.5
Oct        -0.1        -2.6
Nov         0.1        -2.7
Dec         0.1        -1.1

The above is the M4 money supply data from the Bank of England and it doesn't make pretty reading for those scared of deflation.

I don't necessarily see falling prices as a bad thing after all we've have falling prices for food and electronics for decades, in real terms at least, without any bad effects.

elusive82

Regional variations are well worth considering, living in the midlands some area's are on the increase, probably due to a large uk car manufacturer

theEnd

I think the fear of deflation is overplayed.

The IT/Electronics industry is constantly in deflation, yet people don't defer spending or investment.

Deflation is bad for the speculators, but could be good for long term real investment and production.

.... but obviously they'll just print more money!!!

westernpromise

Feels like a buying opportunity.

Blacklight

theEnd wrote: »

I think the fear of deflation is overplayed.

Indeed. Peston was on the radio this morning trying to stoke the fire and whip up public panic like it was 2008 again.

purch

A couple of months of slightly negative CPI will not be deflation in any real sense.

The Beast(Inflation) was slain a number of years ago and the whole landscape has changed. The GFI has only amplified the effects.

ruggedtoast

I dont really get the deflation fear thing. Apparently its fine for us to be paid less every year in nominal terms. And fine for the government to steal our money every month in real terms with inflation - but its a national tragedy if Lidl charge less for a packet of biscuits in April than they did in March.

Generali

ruggedtoast wrote: »

I dont really get the deflation fear thing. Apparently its fine for us to be paid less every year in nominal terms. And fine for the government to steal our money every month in real terms with inflation - but its a national tragedy if Lidl charge less for a packet of biscuits in April than they did in March.

The problem is that business debts don't fall along with prices so they end up going bust and not employing you and me.

wotsthat

Like everyone I'll be fine with deflation until my wages start to deflate because I'm having to sell my widgets for a lower price.

Graham_Devon

We've had deflation in wages in sectors of the UK for years now. Can't see wage deflation being an major issue to be honest....or even a minor issue considering it's already happening.