 You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
If inflation is 0.5% surely this is bad for the country because the "Growth" won't be there for the budget figures later in the year so Gideon's figures will come up short...
Or is this figure removed from his figures?
it can be very bad for government finances, high inflation erodes government debt.
Changes in prices does not mean changes in output.
I am confident that once more george will miss his targets, blame some one else { if not Europe then Oil I guess] then declare it a success anyway.
Ok,but could inflation become a minus figure, and what would that mean to the country?
Negative inflation is called deflation and would devalue the cost of goods etc, things would become cheaper but since this is also a cause of economic growth it in theory would spur the economy to grow, just more slowly.
E.g oil/gas becomes cheaper so manufacturing becomes cheaper, we pay less to heat our homes so buy more beer and chips and the chippy/beer man buys a Range Rover and the Range Rover Salesman gets a bigger bonus etc etc - Someone who is an "economist" will be along in a moment to tell me I'm talking pish.
From what I picked up off the radio this morning - deflation encourages people not to spend.. why not wait until tomorrow/next month, it'll be cheaper? So can put the brakes on spending / growth etc.
This becomes a vicious circle.. as spending slows, money gets tighter, more deflation, spending slows further... Japan got into this loop and took years to recover.
I think the other concern is that if deflation looks likely, then people stop spending (why buy it now when I can wait till next year and it will be cheaper) which causes all sorts of problems for the economy.
(edit, as posted just above while I was reading)
E.g oil/gas becomes cheaper so manufacturing becomes cheaper, we pay less to heat our homes so buy more beer and chips and the chippy/beer man buys a Range Rover and the Range Rover Salesman gets a bigger bonus etc etc - Someone who is an "economist" will be along in a moment to tell me I'm talking pish.
Well I'm not an economist but falling prices for goods causes people tp defer purchases because the stuff will be cheaper later. This causes the exact opposite effect of what you suggest, suppressing manufacturing and investment.
One of the other key problems with low inflation and the putting off of spend is that we already have low interest rates.
So one of the key fiscal levers of reducing interest rates is limited.
There is a broader question though which is whether developed economies can actually continue to grow or whether they are now in a different place from 'traditional' economics
I'd imagine deflation would also make it less attractive to borrow to invest, and vice versa.