Office For National Statistics: UK Falling Into Massive Deflation

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The economy of the UK for the first time in over 25 years looks like it may be about to fall into a depression. This coming from Office for National Statistics, which is suggesting that massive deflation is on the horizon for the UK in the not-so-distant future.

There are a lot of factors that go into the Office For National Statistics to make a declaration such as this. Press TV says:

Britain is on the edge of its first period of falling prices in at least 25 years, with a supermarket price war and energy price cuts.

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Inflation, as measured by the Consumer Prices Index (CPI), fell to zero in February for the first time since records began in 1989.

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Experimental data from the Office for National Statistics suggest it is also the lowest rate since 1960.

Economists said it was a “close call” as to whether inflation remained at zero in March or dipped to -0.1 percent, the Telegraph reported.

Petrol prices rebounded by 3.6 percent last month, which is expected to push up the headline rate by 0.1 of a percentage point. However, this is expected to be offset by a “substantial fall in food prices”, which was noted by the British Retail Consortium earlier this month.

Now Keith Pilbeam, Professor of International Economics and Finance at City University, London, says: “Deflation is falling prices over the time, but it’s only a real danger if it is continuous and it goes on for years and years like it has in Japan.

“If that happens of course consumers will delay their purchase of goods knowing that they are going to be cheaper in future but it’s unlikely to be the case of the UK.”

“What’s causing the deflation of course is the overtime that’s been squeezed on real wages, so people have found the cost of living has been going up more than their wages and therefore they have got less money to spend. And since it’s been going on for 6 7 years in a row, no wonder there is a lack of demand in the economy,” Professor Pilbeam told Press TV’s UK Desk on Monday.

“Eventually it will become a problem for policy-makers if it is continuous over the years, but I don’t see that at the moment as being a big danger.”

Do you think the UK is going into a deflation?