UK economy encounters deflationary pressure
In a worrying turn of events it has been revealed that the UK economy is falling further and further under the spell of deflation as prices begin to come under more pressure and businesses struggle to survive. While the UK government prefers to use the Consumer Prices Index (the CPI excludes housing costs) there are many who believe this gives a misinterpretation of the UK economy. The CPI fell from 2.9% to 2.3% between March and April which was slightly worse than analyst expectations of 2.4%.
However it is the fall in the Retail Price Index (RPI) which is concerning many analysts with Aprils figure of -0.4% under further pressure and dropping sharply to -1.2%. This is the figure which includes housing costs as well as everyday living costs and has now fallen to its lowest level since records began back in 1948. There are many who believe the risk of deflation is greater than the risk of inflation over the next few years as deflation has a reputation for destroying economies and destroying businesses.
In effect deflationary pressure will see prices for consumer goods and services fall on an ongoing basis which would place more pressure on business profit margins, lead to cost cuts and eventually lead to a rise in unemployment. The risks are there and they are starting to become ever clearer!
Share this..
Related stories
Shareholders vent fury at Lloyd Bank
Yesterday's Lloyds bank shareholder meeting was a volatile affair with many private and institutional investors flagging their concerns about the secret £26 billion loan from the UK government. Even though the £13.5 billion rights issue was voted through by shareholders there is still a concern at the way in which the operation has been run over the last 12 months. Lloyds bank was for many ye...
Read MoreFSA to send bonus questionnaire to UK banks
The Financial Services Authority (FSA) is in the process of finalising a questionnaire which will be sent to all UK banks asking for information regarding remuneration and bonuses. The questionnaire will contain 33 questions which will allow the FSA to get a handle on how members of staff can obtain bonuses, any guaranteed bonuses and ultimately how the system works regarding each banking institut...
Read MoreIs it time to consider protectionism in the UK market?
The US government has formally included a clause in the various rescue packages which are ongoing in the country, which will see a return to "buying US products". This particular clause was inserted by Barack Obama as a means of ensuring that the US workforce and US companies are first in line when new contracts and new business is handed out. This is in complete contrast to the UK government's po...
Read MoreBritish Airways risks the wrath of unions
British Airways has today announced plans to cut 1700 full-time jobs in the UK with many of these changes being pushed through without union consent. At a time when British Airways literally needs as much help as possible it seems as though the directors of the company are looking for a fight with unions but surely this is not the case?
As we have covered on numerous occasions, Bri...
Boris Johnson issues a hands-off warning to the EU
The Mayor of London Boris Johnson has today issued a hands-off warning to the EU which appears to be determined to reduce the influence of financial markets in the UK and take control of the European financial sector. A number of specific regulations have been introduced by the EU which many people believe are targeted purely and simply at the London market which is officially the number one finan...
Read More