We’ve now entered deflation – here’s why

What pushed us into negative inflation?

The UK is experiencing deflation for the first time in more than 50 years.

The Office for National Statistics has confirmed that our inflation rate was negative in the year to April 2015, for the first time since 1960.

CPI inflation was -0.1%, compared to 0% for the year to March 2015.

Air and sea fares were the biggest contributor, and the timing of Easter was also a factor.

James Sproule, chief economist at the Institute of Directors said: “The slip into deflation should not worry us, as it is primarily caused by a drop in the cost of energy, which is good news for households and businesses. Falling prices in necessities, such as food and transport, along with a period of sustained job creation and wage growth mean demand and consumption will remain buoyant.

“Deflation can be a chronic problem where it represents a lack of consumer confidence and an unwillingness to spend. This danger is very real in some parts of southern Europe, but is not even a distant threat in the UK. While deflation does cause the cost of debt to rise in real terms, the benefits to the wider economy of a period of falling prices far outweigh any downsides.”

Read our article explaining what deflation is, and why it’s great news for you.



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Readers' comments (1)

  • This IoD mouthpiece doesn't know what he is talking about. He might be experiencing a period of sustained wage growth, but millions of ordinary people are not and will not.

    So this deflation does indeed represent a real threat, because people do not have the confidence and they do not have the spare money. So they are unwilling to spend, and everyone wants to pay down their debts.

    Another rousing cheer for George Osborne, the most incompetent Chancellor in living memory, responsible for driving the UK economy further into crisis with his ill-advised and simplistic views and savage ideologically driven agenda of unnecessary spending cuts.

    Well done, Tory voters - you will live to rue your mindless actions.

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