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As we await the deluge of New Year trading statements from the retail sector there are concerns that Marks & Spencer will deliver a downbeat report on the Christmas and New Year period. There...
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Sunday 24th August 2008
In basic terms inflation is the movement in any price or prices over a set period of time and has been in the headlines over the last few months. It can and does have a major influence over how investment markets and the government of the day react, something which has been demonstrated in great detail of late!
While there are those who claim inflation devalues the value of money, which it does if incomes do not rise at least in line with inflation, the measurement is a very important element of any economy as it ensures growth – so long as is it kept under control.
At the moment inflation is approaching 5% which is more than two times the government target rate of 2%. The increase has been fuelled by a substantial increase in the cost of living with fuel and energy prices affecting all areas of the economy. While inflation is way too high at the moment the fact that income inflation (i.e. wage increases) is running at less than the rate of inflation means that household incomes are not keeping pace with the increase in prices.
If ever you hear that the UK is going into a period of deflation this would be very bad news and unless turned around very quickly it can soon turn into a depression as seen in the US in the early 1900s. |
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