this would be nice were it to be based on sound fundamentals,
ie if inflation really was falling
but to say that shops have had to drop prices to get people to spend....
and knowing that raw material prices and factory gate prices are the highest they
have ever been
leads one to conclude that shops dropping prices is a gimmick and not sustainable
and will either drum up custom or see the shops going bust
let's wait and see what happens
Milan.
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"Surprise" drop in the cost of living.
Bank of England expected to delay rise in interest rates
Interest rates were widely predicted to increase from their historic low of just 0.5 per cent as early as next month to help combat soaring inflation.
But official figures show inflation dropping from a 28-month high due to lower food and drink prices as retailers slashed prices to encourage consumers to spend.
The Consumer Prices Index, the Government’s preferred measure of inflation, fell to 4 per cent in March, down from 4.4 per cent in February, according to the Office for National Statistics. The Retail Prices index was 5.3 per cent, down from 5.5 per cent.
The drop may ease pressure on the Bank of England to raise interest rates to reduce inflation. However, CPI still stands at double the Government’s 2 per cent target.
The bank was expected to announce an increase in rates as early as next month, but some economists suggested the move will now be pushed back to the summer.
Howard Archer, an economist at Global Insight, described the drop in inflation as a ‘major surprise’.
He said: “It is far too early to say that we are coming out of the inflation woods, particularly given the current level of oil prices and the risk that they could go higher still.
“Nevertheless, the March inflation data suggests that retailers may be coming under increasing pressure to price more competitively to get struggling consumers to spend.
“We currently expect the Bank of England to delay raising interest rates from 0.5 per cent to 0.75 per cent until August…rising to 2 per cent by the end of 2012.”
Among the biggest pressures on CPI last month came from heating bills following a rise in electricity and gas prices this year.
However, this was offset by 1.4 per cent fall in food and non-alcoholic drink prices between February and March. In particular, the price of fruit fell 4.7 per cent this year but rose 0.7 per cent a year ago. Bread and cereals prices fell by a record 2.6 per cent this year compared with a fall of 0.2 per cent a year ago.
Scott Corfe, an economist at the Centre for Economics and Business Research, said: “We expect a fall in real consumer spending this year. The likelihood of a rate rise in May has been significantly diminished.”
Hetal Mehta, an economist at Daiwa Capital Markets Europe, said: “Certainly, all bets are off that there will be an interest rate rise in May.
“A rise in interest rates would help the stock market because it would signal that there is enough strength in the economy. It indicates confidence in the markets.
“If interest rates are kept on hold for longer, it suggests that maybe underlying growth in the economy is not strong enough.”
Source: Bank of England expected to delay rise in interest rates - Telegraph
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WTF, "suprise" drop in cost of living, which planet are they on?!?!
Long may it continue
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