Thursday 15 January 2015

More good news on the deflation front?

Black Friday is a shopping phenomenon in the United States but retailers in the UK are following suit with one-off deals
I really hated the Black Friday phenomenon that occurred in the UK last year. A traditional American holiday (er, Thanksgiving, from all of those emigrants so desperate to escape from Blighty?) which had been hijacked by retailers came over to the UK.

The resulting shopping fest was a bizarre confection.

Also, as we said at the time, it clearly showed how much retailers are struggling that they had to have sales right in the Christmas rush. After all, once you show your discounted prices, people are unlikely to buy again at the normal margins.

So it proved, with nearly all retailers suffering a bad set of Christmas results, the latest being Argos today. Diddums, it does means in real terms people did well at Christmas at the expense of the retailers! Hooray.

Also, perhaps the lesson will be learned by the retailers that pre-Xmas sales are only for the really failing stores, better pricing and holding your nerve will be the mantra next year. Maybe they will notice that in America the whole present giving on Christmas day thing is not at the same extreme levels that it is in the UK - hence the need for Black Friday and the timing of it.

No doubt, this mass discounting effort has also aided the steep drop in inflation to 0.5% that the UK experienced in the last quarter of 2014.

And lo, Black Friday can return to America whence it came.


Steven_L said...

But there wasn't really any decent stuff discounted. A few clothing retailers emailed me about having 25% off their new season stuff. But they do that kind of thing all the time anyway.

The January sales are a load of tosh too, they just discount all the rubbish nobody wants.

It's when you expand your search criteria to include the rest of the world you see just how much we choose to overpay for stuff here.

One of my resolutions this year is to have a go buying things I want online from the USA and Japan.

BE said...

SL, beware the evil so-and-sos at HMRC. They tend to intercept stuff mailed in from overseas that might be shopping, and charge the 20% VAT.

With oil prices down, it might start to get competitive to go shopping in New York!

Agree about how shit "Black Friday" was. Amazed it wasn't branded racist as well.

dearieme said...

"Amazed it wasn't branded racist as well."

Aw, be fair. There were some East Asian and South Asian faces in the photos of the scrums. Even the occasional white one.

Steven_L said...

BE, even with the VAT and import duties, a lot of durables are still cheaper. Plus you can get a lot of stuff that isn't even distributed in the UK market.

Eg, high end Shimano fishing reels, even after shipping, VAT and duty are 40%+ cheaper than UK RRP's and 20%+ cheaper than UK suggested sale prices if you buy them from Australian, Malaysian or Japanese ebay sellers.

You can get stuff for pretty much the same price Shimano sell to UK dealers for, and they have to wait 3 or 4 months for delivery as they are made to order.

BE said...

You should be buying British fishing reels!

Bill Quango MP said...

HMRC guidline is - Anything over £15 imported from outside the EU is subject to 20% VAT.
And there is an £8 handling charge added too.

The current trade negotiations with the USA are supposed, if I read the economist correctly, to reduce our cost of goods from USA by some 12%.

USA shipping is no longer subsidised by the US post office, as it used to be just a few years ago. And the US has ceased sea shipping of prvate goods through their usual United States Postal Service. That's why when you look at USA prices on ebay, an item of about £50, that is some £20 cheaper than in the UK, has a £20-£30 shipping cost on it. And that's without the import duties

Budgie said...

CU, I am surprised you headline "deflation" when we merely have one low inflation figure. You stated in your last post "There will be no inflation for months, maybe the whole year", and I mostly agree with this. But I think deflation for months is unlikely, even as measured by CPI.

What I really don't understand is why you pessimistically talk of "deflation", and yet apparently ignore the boost the low oil price will generally give to our economy. A couple of months ago I felt that the falling oil price was "all our QE Christmases come at once". Me the optimist? - how odd.

The boost is almost inevitable** but real and sustained deflation is fairly unlikely. **Agreed, all "forward" futures, tools, views or predictions are in the end guesswork. Agreed it will depend on a sustained low oil price. But suddenly giving every family more money, when has that not caused more spending?

Could our economy respond to an increase in demand? There I am more pessimistic: I do not see much spare capacity. Consequently I tend to see higher inflation than we now have, by the year end.

CityUnslicker said...

Budige - I said 'good' deflation. This is not pessimistic, it accords with the view you expressed. Pricesof real things we import falling is good, always.

I worry a bit the pound maybe about to soar in value though - see SNB today and imminent QE in Europe.

BE said...

One of the ECB QE options involves buying bonds according to the ratios of shareholdings by national central banks.

Guess how much of the ECB share capital is held by the Bank of England!!

Euro-QE will reach these shores :-)