[uk_rpi] [deflation]

For many years, inflation has been of huge concern, in the UK and worldwide. 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? If Japan's miserable decade plus is anything to go by, plenty.

If prices are expected to fall, then the natural response, at an individual level, is to delay buying anything until next year, or for longer. At times of economic stress, such as when the terms for Brexit must still be finalised, and we are suffering from Corona,  that is even more likely to happen. If, however, everyone were to do that, then economic activity would spiral downwards. For more information, look 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 March 2022, RPI increased by 9.0%, the highest since the year to March 1991 (but we do recall the high 20s during the 1970s). In the year to March 2022, CPI (CPIH) increased by 7.0% (6.2%), last seen in the year to March 1992 (CPIH increases have been substantially higher, peaking at 9.2% for 4 months at the end of 1990). On 05 May, the Bank of England predicted that (unstated) inflation would peak at just over 10% by the end of 2022. Right now, deflation is not a serious issue.