Newspaper article The Evening Standard (London, England)

Deflation Could Hit Economy as Prices Fall

Newspaper article The Evening Standard (London, England)

Deflation Could Hit Economy as Prices Fall

Article excerpt

Byline: HUGO DUNCAN

BRITAIN is braced for a dangerous bout of deflation after living costs went up at the slowest rate for nearly 50 years.

Figures today show the retail prices index rate of inflation fell from 0.9 per cent in December to just 0.1 per cent last month, the lowest since 1960.

It was dragged down by cheaper mortgage repayments, falling energy prices and transport costs and steep discounts on the high street. The Government's decision to cut VAT from 17.5 per cent to 15 per cent has also taken the sting out of inflation by lowering prices. Experts warned that deflation could be disastrous for the economy. A long period of price falls would see consumers put off spending in the hope of buying goods more cheaply in future, leading to crumbling profits and soaring unemployment.

The Government's preferred measure of inflation, the consumer prices index, which strips out housing costs, also fell from 3.1 per cent to three per cent, having peaked at 5. …

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