[uk_rpi] [deflation]

For many years, inflation has been of huge concern, in the UK and worldwide; it  still is. During part of 2009 but no longer, the main concern was  deflation€¯. Well, what's not to like about prices falling, something to which we're used with electrical goods and clothes? Looking at Japan's miserable decade plus, plenty.

If prices are expected to fall, then the natural response, at an individual level, is to delay buying anything until next year, or even later. At times of  economic stress, such as when the terms for Brexit still had to be  finalised, and we were suffering from Covid,  that is even more likely to happen. If, however, everyone were to do that, then economic activity would spiral downwards (see here).

Among other reasons, including the Russian invasion of Ukraine, the pandemic  and associated worldwide supply chain issues have led to inflation  increasing very fast. In the year to December 2022, RPI increased by 13.4%, the highest since the year to March 1991 (but we do recall the  high 20s during the 1970s). Over the same year, CPI (CPIH) increased by 10.6% (9.2%). Right now, deflation is not a serious issue.