The cost of living in Britain has fallen for the first time in decades, thanks to falling oil price, cheaper food and the strong poundOsborne: It’s good newsUK CPI falls by 0.1%The key chartsMeanwhile in the eurozone:Euro tumbles as ECB vows to speed up its stimulusEuropean car sales rise againGreek finance minister would rather pay pensions than IMF 11.13am BST Britain isn’t the only country experiencing disinflationary pressures. America’s annual inflation rate fell by 0.1% in March (we get April’s data on Friday).There is no doubt the US economy is no longer the world’s locomotive while China is struggling to replace it and Japan and Germany have long since given up. Central banks seem to be running out of ideas and there is an increasing disconnect between economic fundamentals and asset prices. There are potentially very dark clouds gathering that could prolong this deflation and make it malign. 11.01am BST Britain’s inflation rate will soon spring back into positive territory, predicts Martin Beck, senior economic advisor to the EY ITEM Club:“CPI inflation in April recorded its first negative reading since 1960, but this looks likely to be a one-off. Overall today’s reading may be an interesting piece of trivia, but it will have no tangible impact on the economic outlook beyond offering further evidence that UK consumers are enjoying a substantial boost to their spending power.” 10.52am BST TUC General Secretary Frances O’Grady does not share George Osborne’s optimism - she urges the chancellor to hold back from fierce cuts in his Budget in July:“The first period of negative inflation in over half a century could turn out to be the canary in the mine, signalling that there’s something very wrong with the recovery. And with the threat of deflation set to continue, the Chancellor’s plans for extreme cuts risk putting the economy into more serious trouble.“We need a better plan for growth if we are going to have a recovery built to last with a firm foundation for improving living standards. Stagnating prices are not a sound foundation for the strong and sustained pay rises that workers have been waiting years for.” 10.45am BST Andrew Sentance, senior economic adviser at the accountancy firm PwC, reckons that inflation could be pushed up as British workers gets a long-awaited pay rise.“Though prices are slightly down on a year ago according to the CPI, sustained deflation is not on the cards. Once the impact of the big drop in oil prices drops out of the annual inflation rate, it will move back up to 1-2% over the next year or so. With wage inflation picking up we may soon be considering the prospect of above target inflation.“In the meantime, flat or slightly falling consumer prices are good for growth, boosting real consumer spending power. So a temporary period of slightly negative inflation can be good for the UK economy.” 10.33am BST Falling prices means there’s no reason for the Bank of England to raise interest rates soon.“With inflation set to remain below 1 per cent this year, a rise in interest rates anytime soon seems off the cards. Rates are likely to remain low into next year and beyond, continuing to help the domestic recovery.” 10.30am BST James Sproule, Chief Economist at the Institute of Directors, agrees with George Osborne that Britain hasn’t lurched into a harmful period of deflation:Falling prices in necessities, such as food and transport, along with a period of sustained job creation and wage growth mean demand and consumption will remain buoyant.“Deflation can be a chronic problem where it represents a lack of consumer confidence and an unwillingness to spend. This danger is very real in some parts of southern Europe, but is not even a distant threat in the UK. While deflation does cause the cost of debt to rise in real terms, the benefits to the wider economy of a period of falling prices far outweigh any downsides.” 10.27am BST For the worst housing inflation, look at Scotland -- where prices are up almost 15% since March 2014.Annual house price inflation rises for first time in 7 months. 9.6% across UK. But no longer just driven by London: pic.twitter.com/qs2P7EfIgm 10.25am BST There’s not much sign of negative inflation in the UK housing market.New data this morning shows that UK house prices increased by 9.6% in the year to March 2015, up from 7.4% a month earlier. 10.21am BST The recent strength of the pound has also driven prices down over the last year, by making imports cheaperJeremy Cook, chief economist at the international payments company, World First, explains:Sterling is around 5.8% stronger than this time last year and the past 12 months have obviously been a significant decline in oil and food prices. The subsequent effect on imports into the UK means that disinflation is piggybacking on every product that we bring in from abroad.”“As oil prices recover and last year’s declines fall out of the inflationary basket then this will become less of an issue. 10.18am BST Another sign that Britain isn’t in “damaging deflation” - the Retail Prices Index, a broader measure of inflation that also includes housing costs, rose by 0.9% over the last year. 10.11am BST Kevin Doran, Chief Investment Officer at Brown Shipley, a private bank, says we shouldn’t read too much into the CPI index:“Despite today’s inflation numbers showing a fall into negative territory, investors shouldn’t be fooled into thinking this is an accurate representation of the state of inflation in the UK. You don’t have to look far to see that there is an abundance of inflation in asset prices, largely in bond and equity markets, with people rightly talking about bubbles in each of these respective asset classes, particularly tech stocks. 10.06am BST Over the last year, food prices have fallen by 3.0% and prices of motor fuels fell by 12.3%, according to today’s inflation report.This chart gives a better picture of price changes over the last 12 months and their impact on the inflation date: 9.58am BST What to call -0.1% CPI: negative inflation or deflation? My take: if you’re calling it deflation make sure you emphasise it’s not ‘30s style 9.56am BST Here’s another chart, showing how UK prices have risen (or very occasionally fallen) since the end of WW2 rationing:CPI inflation since 1950. Last time it was in negative territory was 55 years ago pic.twitter.com/o6atO2fOZV 9.50am BST A brief bout of negative inflation is NOT the same as full-blown deflation (defined as a protracted period of falling prices, where consumers expect things to keep getting cheaper).“Today we see good news for family budgets with prices lower than they were a year ago. As the Governor of the Bank of England said only last week, we should not mistake this for damaging deflation.Instead we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing. Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them should they arise.” 9.42am BST We should enjoy falling prices while we can, says Tom Stevenson of Fidelity.Speaking on Sky News, he explains that Britain isn’t turning into Japan [which suffered actual deflation for many years], and this isn’t a return to the depression of the 1930. 9.40am BST CPI at -0.1% year on year, first dip into deflation since 1960. Timing of Easter this year an issue slightly depressing prices. 9.39am BST This chart confirms that transport costs were the biggest drag on inflation last month.That’s because Easter fell in March in 2015, but in April in 2014 -- so transport firms didn’t put their prices up this year. 9.33am BST 9.30am BST Breaking: Britain is experiencing negative inflation for the first time in over half a century.The Office for National Statistics just reported that the consumer prices index fell by 0.1% in April. That’s the first negative reading since March 1960. 9.24am BST This chart, from ING, shows how inflation, as measured by the Consumer Prices Index, hit a record low of zero this year. 9.09am BST Just 20 minute to go until we get the UK inflation data for April.Jeremy Cook, chief economist at World First, predicts that the consumer prices index will have turned negative, after being unchanged in February and March.Expecting UK CPI to see a YoY decline in April. Nothing catastrophic, but strong GBP, lower oil and food should see a print of -0.1%UK consumer price inflation could fall into negative territory for the first time in the series’ history. This won’t last long though with the BoE expecting inflation to be at 2% in 2 years’ time.....Motor fuel prices are starting to move higher given the pick-up in oil prices. Furthermore, we are doubtful that much more food price deflation can be squeezed out of the supermarket fight for market share. Preemptive tweet: if CPI goes negative today that is not "bad deflation" & no reason to panic. As long as wages are growing, it's benign. 9.06am BST European stock markets have jumped, following the news that the ECB will accelerate its bond-buying programme in May and June (before heading to the beaches for the summer).Traders are deducing that a weaker euro and an extra dose of stimulus is good news for European firms, pushing up shares in Paris, Frankfurt, Milan and Madrid: 8.55am BST Newsflashes are coming in that Jean-Claude Juncker, EC president, has denied that he’s drawn up a compromise plan to break the Greek deadlock.*JUNCKER DISMISSES REPORTS OF GREECE COMPROMISE PLAN BY HIM*JUNCKER RULES OUT POSSIBILITY OF GREECE AID DEAL IN RIGA*JUNCKER FORESEES AID DEAL ON GREECE AT END-MAY OR IN EARLY JUNEEU Commission Pres Jean-Claude Juncker tells Bloomberg he expects end-of-May/early-June Greek deal & that he's personally involved in talks. 8.40am BST Greek car sales may be up 43% this year, but they’re still way, way below their pre-crisis peak:About that 43.3% y/y rise in Greek car regs. Impressive, but also about base effects, trend still below 1990 levels! pic.twitter.com/vtymqhi8UX 8.32am BST The European Central Bank is planning to speed up the pace of its bond-buying stimulus programme before the summer lull, according to senior policymaker Benoit Coeure.In remarks that just send the euro tumbling, Coeure explained that the ECB wants to buy more bonds than average over the next six weeks, to avoid the “notably lower market liquidity” in late July and August.The Eurosystem is taking this into account in the implementation of its expanded asset purchase programme by moderately frontloading its purchase activity in May and June, which will allow us to maintain our monthly average of €60 billion, while having to buy less in the holiday period. If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again.The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility.Cœuré: we frontload purchases in May and June to maintain monthly average of 60bn while buying less in holiday season http://t.co/do7tWq3flnCœuré: slightly higher purchases in coming weeks are therefore unrelated to the recent episode of market volatility http://t.co/do7tWq3fln 8.17am BST Car sales numbers from Greece suggest Greeks are storing cash in cars. Whether that is in the boot or not remains to be seen 8.12am BST Car sales across Europe have risen for the 20th month running, helped by a remarkable boom in demand in Greece.Industry body ACEA has reported that new passenger registrations in the EU rose by 6.9% year-on-year in April, as the pick-up in consumer spending continues.All major markets contributed positively to the overall expansion, especially Italy (+24.2%), which posted double‐digit growth, followed by Germany (+6.3%), the UK (+5.1%), Spain (+3.2%) and France (+2.3%) that also performed better than in April 2014. European car sales rose a 20th consecutive month in April, bolstered by reviving economy and new models from Renault, BMW and Fiat ChryslerDespite depreciating in value quite quickly, cars are still a handy asset to own because they can be put to productive use - especially if the alternative is just stashing your money under a mattress. In a strange irony of Greece’s woes, German industry is perversely one of the main beneficiaries of the country’s banking collapse. Greek consumers, like many of their fellow Europeans, buy German cars more than any other brand. Cars sales: decent proxy for Greek capital flight http://t.co/zILnpZQVM3 7.52am BST Germany’s Deutsche Bank has made a dramatic intervention into the debate over Britain’s membership of the European Union, revealing it might quit the City if the UK left the EU. Related: Deutsche Bank may leave Britain in event of 'Brexit' – reports 7.44am BST Last night, Greek finance minister Yanis Varoufakis was grilled about the country’s bailout negotiations in a live TV interview on Star TV.“I think we are very close....Let’s say (it’s a matter) of about a week.”“I assure you that if we face a dilemma between paying a creditor who refuses to sign an agreement with us and a pensioner, we will pay the pensioner.....I hope we will be able to pay both.”“The lack of liquidity is neither the choice nor the responsibility of the Greek government. It is a tough negotiating tactic of our partners, and I do not know whether everybody in Europe feels proud of it.”“It would be unfair for Greek citizens to have to take a position on such a matter, answering with either a yes or a no.”Varoufakis: I am a soldier, never considered resigning - http://t.co/pj2NGKwYfW pic.twitter.com/zy6fvUBFIdVaroufakis: We are NOT considering a different currency -http://t.co/ggxdwIAyEK 7.24am BST Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Britain’s headline inflation rate may turn negative for the first time in half a century. The cost of living has been unchanged for the last two months, but economists reckon it could actually have fallen in April, thanks to the cheaper oil and fuel. Related: UK inflation picked to turn negative for the first time in more than 50 years Related: Alexis Tsipras claims Greece is close to securing deal with Brussels and the IMF With a suspension of repayments [of the debt], measures that restrict the “freedom” of capital flight, governmental control over the banks, taxation of capital and of the rich for the financing of pro-people measures, support of this policy with any and all possible means, and with the possible break from the EMU.Call for "rupture now" by the Political Secretariat & Central Committee of #Syriza http://t.co/cGcxZlGExD #Greece Continue reading...
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