Wednesday, July 9, 2014

Nothing to do with shoppers. This deflation is worldwide. Rates WILL NOT go up any time soon.

Savvy British shoppers and discount stores force down retail prices

Shop prices fell at the steepest rate for at least eight years last month as the popularity of discount stores among the middle classes helped to drive down the cost of clothing and consumer goods. The overall price of items at the till fell by 1.8 per cent compared with June last year, with the price of clothes down by 13.7 per cent year-on-year. The figures, compiled by the British Retail Consortium/Nielsen shop price index, show the fastest drop in prices since the trade association began compiling data in 2006. It was also the 14th month in a row in which shop prices fell. Although the price of food is still rising, it did so by only 0.6 per cent in June, the lowest level of inflation since the index began.

Posted by libertas @ 07:35 AM (3096 views)
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19 thoughts on “Nothing to do with shoppers. This deflation is worldwide. Rates WILL NOT go up any time soon.

  • I will be sticking with my variable rate mortgage. Presently, with 30% deposit, I am paying £850 a month mortgage payments with half that paying off the principal, about £7k a year, yet rental in this area is around £1500. Our strategy is to pay £1500 a month, which would pay off the whole house within about 10yrs. We will pay it off much faster if we rent out a room. If this is the beginning of a retail deflation trend, house prices will double in ten years as rates go negative and people plough cash into property.

    We can always fix our mortgage soon as we smell that rates will rise.

    Sorry, I had said fix a mortgage for as long as possible, looks like I was wrong.

    Sorry, I was a goldbug, but in this scenario, gold could collapse in half before it turns up, and we are just a quarter or half way through its bear market phase.

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  • In the article, they say that falling prices are here for “AT LEAST” a year.

    “Prices for non-food items fell 3.4 per cent last month, compared with 2.8 per cent in May. While clothing prices fell fastest, the price of electrical goods was also down 4 per cent compared with June last year.” WOHA!! This shows that the recent growth in GDP HAS NOT affected prices.

    WE ARE in a Goldilocks economy now of growth and deflation.

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  • “The figures only take into account the prices of food and consumer goods. Overall inflation remains at 1.5 per cent because of increasing fuel, utility and other household bills.”

    So what happens if oil falls in price in response to European and US contraction, plus all that shale oil? It would not take much to send the RPI and CPI into serious negative territory if oil goes bear as it looks like it may.

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  • Yawn.

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  • Nothing to do with the strong exchange rate then… No need to mention that.

    “We can always fix our mortgage soon as we smell that rates will rise.” – So you know how to outsmart the bankers then? Your knoladge and information is better than the mortgage lenders?

    Libby’s purchase justification continues as he clearly sees the tsunami in the distance. Keep looking the other way and thinking nice thoughts, you will still be here this time next year.

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  • Libby’s purchase justification continues as he clearly sees the tsunami in the distance. Keep looking the other way and thinking nice thoughts, you will still be here this time next year.

    But it’s rather funny how people only see what they want to see, and trawl around to find more and more justification to support their position. It’s really akin to building castles in the air.

    The world alas, is far more complex.

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  • “WILL NOT” (in Caps)

    King Canute comes to mind…..

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  • Alan, more the other way around. To say rates will rise whilst prices are falling is more akin the King Canute. BOE are attempting to create a perception of rising rates to do something to calm the housing market, knowing full well that the next move in rates could be downwards.

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  • britishblue says:

    Everyone is entitled to an opinion. My opinion is the 25 years is a relatively short time in history. If i have another child they will live to an average of 100. In the last 25 years we have had one house price crash and should have had an all mother of crashes in 2008, but for QE, etc. You can only buck a system for so long. The Brazil and Columbia game comes to mind. It seemed like there was quite a decent ref who wasn’t flashing out bookings, so the fouls got worse and worse as players pushed the boundaries until one of the best players in the tournament was stretchered of and another was bruised all over. Loose monetary policy will lead to worse and worse bubbles, greater inequality and greater discontent. If you buck the natural course of events for too long, something will give, Libertas has a strategy and there is nothing wrong with an opinion. I don’t agree with it, but at least it is a strategy. My opinion is that something is going to give. I wouldnt at all be surpirsed if America are able to pass the baton of QE over to the Eurozone, that there will be another balck swan event that America can skirt around.

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  • If the fall in prices was down to exchange rates, how come there is deflation in Scandinavia, almost deflation for the whole Eurozone, contraction in USA? I was until a few weeks ago looking to fix for ten years. It has been my surprise at the Norwegian tax cut, the US contraction in the first quarter and collapsing consumer borrowing and inflation in the Eurozone that has caused me to ewe turn from thinking prices could stabilise and rates rise to now thinking that there will be a housing boom and falling interest rates.

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  • British Blue, 25 years is a short time, and with my plan I own a three bed house in Zone 4 London, outright, within about 10 years. Purchasing right next to the proposed Crossrail 2 route, but hedging my bets, also next to the Liverpool Street to Enfield / Cheshunt Line that is becoming London Overground next year, with new rolling stock and increased services commencing from 2018.

    Something may give, but the only thing that would screw my plans is soaring interest rates, yet I have a tracker without early repayment penalties, so I can fix for five or ten years at a days notice, and I can rent out a room for £4250 a year tax free if all goes to pot.

    I don’t care if prices fall 3% a year for 25 years on the trot, which they won’t, because I would still be better off than renting, because over half my mortgage goes to re-payments, and the overall mortgage payments are 50% less than renting in this area!!!! Now, most of the HPC arguments about prices work well as a warning for highly leveraged BTL investors who would be wiped out by the price drops that I can shoulder as a owner / occupier.

    Yes, it looks like Eurozone is taking over QE from USA.

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  • i remember the 90`s says:

    Give it a rest ,you are down to a handful now of punters .

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  • handful

    Not sure it’s that many….they are ALL property bears now.

    Property is wonderful, only ever goes up…..and yes, it was different this time….

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  • Returning to the article posted, we have always ‘shopped around’ rather than rely upon one of the big four to shaft us. Even so our shopping bills continue to rise. I take the quoted fall in retail prices with a large and increasingly expensive pinch of salt.

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  • This price index of non food only makes up 60% of retail business most likely brick and mortar where the prices are already over priced, don’t blame them reducing their prices to try and compete with online retailers, prices going down in this area is a good thing. I don’t know if it contains many internet only retailers but places like amazon will be knocking some sense into the brick and mortar shops over the next few years.

    RE: libertas

    So you pay £850 a month for your mortgage and can rent it out for £1500, so thats £650 profit potential, the profit is not guaranteed and due to the amount of profit it is likely to turn out to be high risk in the long run. The days of free money for nothing at all but buying a property and getting lucky are coming to an end, and those over exposed will be wondering where there shiny silver tea set has gone as the baliffs took it away for not paying a bill…

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  • Problem is that it is reported inflation, not real inflation, that determines interest rates. Lets see what RPI and CPI are next round of BOE stats. If they remain muted at circa 1.5% for CPI, really, anybody should realise that BOE’s talk of increasing rates is just that, talk.

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  • “In the last 25 years we have had one house price crash and should have had an all mother of crashes in 2008”

    In the last 25 years, we have had TWO house price crashes.

    But then, in the last 62 years, we have had two house price crashes (and a few other inflation-based ones).

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  • Why are some people spinning this as positive news, raw materials, taxes or fuel costs have not gone down. Manufacturing goods is not cheaper.

    This is retailers cutting and changing stock in favour of cheaper options and cutting margins due to weak demand. Any increased competition is due to that weak demand.

    With the UK population increasing, if grocery businesses are doing this then that’s very worrying.

    This I’m sure is not the basis for a goldilocks scenario.

    Anyone who thinks this is positive news, needs to wake up. Its caused my weak disposable income, high debt forcing people to change spending habits and go for cheaper goods. Nothing else and is completely not good news for anyone else than the top 10 per cent earners.

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  • this is absolute rubbish

    supermarkets have hiked prices over the past few years whilst screwing suppliers.

    our shopping trip each week increases in spend yet we buy pretty much the same.

    Tescos are the worst with fake offers, they bring in their own brand toothpaste for 75p then a week later it is half price at 75p !!! then following week price has gone up to £1.25

    Shops we have noticed smaller pack prices for same price, Tescos broccoli used to be 1kg is now 900g

    Aldi is not much better they have brought prices up on food yet run “special” offers on cheap rubbish from china to pull customers in the door

    all the supermarkets are in this together

    we only see prices going up in shops

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