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19 May 2015 - Britain is in deflation for the first time since 1960

Publié par Clifford Armion le 19/05/2015


UK inflation rate turns negative
Staff (BBC News)
UK Consumer Prices Index (CPI) inflation turned negative in April for the first time on record, falling to -0.1%, official figures show.
It is the first time CPI has turned negative since 1960, based on comparable historic estimates, the Office for National Statistics said.
The biggest contribution to the fall came from a drop in air and sea fares.
The Bank of England has previously warned that inflation could turn negative for a brief period this year.
Chancellor George Osborne said the fall in the inflation rate was only temporary.
"We should not mistake this for damaging deflation," Mr Osborne said in a statement, adding that the lower cost of living driven by last year's fall in oil prices would be a welcome relief for family budgets, in an environment in which average wages were finally beginning to rise.
Read on...
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Defined

What is deflation - and what does it mean for you?
Hazel Sheffield (The Independent)
So we're officially in deflation.
Yes - but economists say this isn't 1930s deflation or Japan deflation, where prices will keep falling.
Many economists prefer to call it negative inflation, because prices are expected to rebound. We're already seeing the price of fuel going up. And if you include housing costs, the rate of inflation is actually 0.9%.
What would real deflation mean?
If consumers and businesses expect inflation to stay low, they might put off spending and investment.
What’s more, the Bank of England might cut interest rates – already on hold at 0.5 per cent since 2009 – further to get inflation up to the target 2 per cent. This would be bad news for savers.
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Explained

It's official - Britain is in deflation
Szu Ping Chan (The Telegraph)
Economists had predicted inflation would remain at zero in April. However, most said negative inflation in the UK was likely to be short-lived.
The biggest drag on inflation last month was a 3pc fall in food prices and cheaper diesel and petrol costs, which fell by 12.3pc in the year to April. The ONS said these two components alone dragged down the headline rate by 0.7 percentage points.
The timing of the Easter holiday - which pushed up travel costs in last year's calculation - but did not affect this year’s data - also dragged the headline rate down by 0.1 percentage points, according to the ONS. "Price changes for these fares between March and April vary notably year on year, with the timing of Easter a likely factor," it said.
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Danger

U.K. Deflation: Time to Worry?
Blog (Wall Street Journal)
Azad Zangana, senior European economist and strategist at Schroders, says he is not concerned by a single negative reading. He adds: “For the Bank of England, the challenge is to consider whether the near term disappointments on inflation and the recent GDP growth release outweigh the stronger labour market data seen lately. If the Bank raises interest rates too quickly, it could scupper the recovery, but if it waits too long, it runs the risk of running higher inflation in coming years. We expect the Bank to remain cautious, but to consider starting to raise interest rates later this year or early next.
It’s probably worth pointing out though, that core inflation, a measure which strips out volatile components such as energy, also turned in its weakest showing since 2001, rising just 0.8%.
Deflation may not be something the U.K. has to fear, but pricing power is still incredibly weak, by any measure.
Read on...


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"19 May 2015 - Britain is in deflation for the first time since 1960", La Clé des Langues [en ligne], Lyon, ENS de LYON/DGESCO (ISSN 2107-7029), mai 2015. Consulté le 19/10/2021. URL: http://cle.ens-lyon.fr/anglais/key-story/archives-revue-de-presse-2015/19-may-2015-britain-is-in-deflation-for-the-first-time-since-1960