Tuesday 19 May 2015

Open Thread: Deflation, Am I Bovvered?

And so it has come to pass: nearly eight years after the financial crisis started, and despite years of QE, the UK is suffering deflation.

Or are we really suffering at all?  With the election safely behind them, will Osborne + Carney let rip?  Is this the strategy for 2020?  Or will the oil price take care of any slack in the economy?

Go for it, C@W people!



dearieme said...

it's just too soon to tell, Hugh.

Anyway, is it deflation Percy?

Shirley not.

CityUnslicker said...

I think it will soon pass. Oil is nearer 70 dollars (as I predicted, albeit one quater quicker) than 30 dollars.

Once the annuals start to adjust at the end of the year we will be back up to 2-3%.

QE in Europe is probably not helping the inflationary cause - and I can't belive I just wrote that!!

Sebastian Weetabix said...

This is the inflation figure calculated without the cost of housing included, right?

hovis said...

Oil will fall back, the global economy is anything but rosy.

Growth is weak and will continue to be so demand destruction and stagnation
will continue as the long run trend.

This is supposed to be "boom" - don't look like it to me.

Anonymous said...

We're doomed! We're doomed!

We had the opportunity to get the best economist of a generation into to No. 11 and we blew it.

Only one man has the Balls to sort this. Ed.

Bill Quango MP said...

There is a supermarket war on too.
Not related to anything except over supply of supermarkets.

Asda and Tesco and Morrisons are discounting quite heavily.
The food basket is getting cheaper.

{though not for me now I've discovered these frozen cocktails..in a pouch ..stick 'em in the freezer ..and then have yourself a Sex on the beach..

What an invention.

I could do a whole post on those things ..

And the Toffypops at Tesco.)

Blue Eyes said...

Peston says it isn't proper deflation, but that there is no other word to describe what is hapoening. What about "disinflation" or "a tiny bit negative inflation"?

We should be looking behind the figures if we want to find out whether or not to be concerned. What is nominal GDP doing? Well the Bank expects real GDP to rise by only 2.5% this year, and with inflation at zero that surely means nominal growth is identical. 2.5% is a low figure for nominal, so the Bank rate should stay low and maybe some more forward guidance or even QE would be appropriate.

Housing? According to the Telegraph, housing made a positive contribution to today's negative figure, which at least suggests the index includes some measure of housing costs. Mortgage rates have never been lower, what are people whinging about??

My usual razor blades are half off at Tesco at the moment. Usually, razors are one of the things discounted only rarely.

John miller said...

The inflation figures are subject to so much buggery they are more a reflection of what the government wants to show than any sort of financial indicator.

Did I just imagine a reduction in petrol price from 1.34 to 1.08?

The knock on effects of that'?

And we get this result?


Blue Eyes said...

Prices have fallen and inflation has turned negative? MUST BE A STITCH-UP!

Timbo614 said...

My opinion is this "deflation" makes a good headline, but let's get real it's 1% of 1% lets wait for a big fat 1 before panicking or celebrating! I'm pretty much out of debt, just polishing off the last of the mortgage. So bring it on!

Anonymous said...

Between 1913 and 2013 we have had over 9000% inflation. (it's government policy to aim for 2 - 3% pa inflation ).

So a little deflation is not a bad thing if it allows us to recover some of the purchasing power the government has destroyed.

Steven_L said...

Did anyone else find Carney telling us to enjoy low energy and food prices while they last a bit creepy?

I think we'll have a growing economy (bar a small mid cycle recession) until about 2025 now.

But throughout that time, public and private debts will continue to grow four or five times faster than GDP.

And this will be what drives the economy, this and selling houses to each other or ever inflating sums.

'Inflation' as measured by official statistics will be meaningless to most people. There will still be loads of cheap sh*t in the shops, loads of moderately priced sh*t and loads of designer tat that costs an arm and a leg.

Demetrius said...

Um, property prices? Rentals? Energy? All those things not covered by the indexes?

Weekend Yachtsman said...

What Anon 10:53 said.

Some things I need to buy might get a bit cheaper; my savings won't be stealthily stolen; people who've borrowed too much might have to pay it back?

And somehow this is BAD news?

I don't think so.