Reasons To be Cheerful # 003

Inflation has started to fall. Indeed, lazy journalists who greet such news with the declaration that "the cost of living is falling" are right this time. Prices are actually falling and are expected to fall faster. See here for details from Ulster Bank.

It has taken a while to add this third reason - quite a commentary on the difficult times through which we are passing. Many of you feel, no doubt, that the election of Barack Obama should have attracted the "gong", and it did indeed cheer many people up, including yours truly.

However, in selecting news for this feature of the website, I have decided to avoid as much as possible developments which are any of the following

• partisan
• already widely known and celebrated
• potentially bad news really

Of course, every apparently piece of good news has the potential to be bad news in disguise, and not everyone will share my view of what is good. For example, undoubtedly owners of ships had a diametrically opposite viewpoint in regard to my first reason to be cheerful. (The second is here; they will all be conveniently corralled together in a section of their own before long, I promise.)

It is, I suggest, unavoidably a matter of judgement, and what you get here is mine (whose did you expect ?). I offer it de bene esse as (some) lawyers would say, or FWIW as (some) internet users and (some) texters would express it. For what it is worth, in other words.

Comments

[Longman Oz]

4% inflation in a contracting economy with rapidly rising unemployment?? If this is what we are being cheerful about these days, then morgues should start looking at diversifiying into the hosting of Christmas parties!

[Fergus O'Rourke]

We don't have 4% inflation in any real sense. Indeed, we have no inflation at all at present, a state of affairs not likely to come to an end for a while. The 4% figures reflect events earlier in the year, which was "a different country".

[Longman Oz]

The bottom line is that the "cost of living" is not falling. Rather, it is growing at a slightly slower rate. Where that remains a serious problem is when earnings are growing at an even slower rate or even contracting!

In that respect, the public sector has agreed to a 11-month pay freeze and many in the private sector will not be getting the end-of-year bonuses that they would normally expect ("bonuses" often being little more than monthly income foregone until the end of the year). The private sector are also likely to have their pay frozen into next year or only a notional increase offered. Moreover, many people have been laid off and are now on benefits and savings!

With at least one round of higher taxes also coming next year, the only real comfort right now is ECB movement on interest rates.

[Fergus O'Rourke]

No, the cost of living is indeed now falling. It's still higher than it was a year ago, though.