Current Inflation Rate – Feb 09 & small business deflation

Annual RPI falls to 0.0% as looming deflation proves a mixed blessing for UK small business.

By News Desk
24th March 2009 at 11:35

RPI set for deflationDespite the predictions of many economists official inflation figures released today reveal a 0.2% rise in the Consumer Prices Index (CPI) for February 2009.

This surprise increase was counterbalanced by the much anticipated fall of the Retail Price Index (RPI), which includes mortagage interest payments and council tax, to 0.0%.

Food and non-alcoholic drinks were the biggest upward pressure on the CPI during February. The only downward pressure on consumer prices came from energy bills which remained static last month compared to an increase the year before.

Downward pressure on the RPI was primarily exerted by falls in the cost of housing thanks to the plunging property market and falling interest rates.

The 0.0% RPI means the spectre of deflation is now very real. And the strange divergence of the RPI and CPI could see wages frozen or cut at a time when many prices are not falling as rapidly as some predicted. Not a good combination in terms of stimulating consumer spending.

For small businesses, however, falling prices are a mixed blessing. Some will benefit from the reduced costs of fuel or transport, but others holding a large amount of stock may well be looking on to see its value falling by the day.

A recent survey by More Th>n showed that UK SME’s costs fell by 2.9% during the last quarter of 2008.

Although not all deflation is wealth destroying, many small businesses will be wanting to cut costs, improve productivity, review contracts and make sure supplies are ordered in smaller, just-in-time batches.

[Picture credit: FireChickenTA99 licenced from Flickr]

Commenting Is Easy

Do you have an opinion on this news item? Have something to add that others might find helpful? Then please leave a comment in the box below.

If you'd like to have your image included next to your comments here, then you can set yourself up with an avatar in just a couple of clicks.

Leave a comment

Related Posts

Photostream

Listen to the sales podcast for SMEs Subscribe to the podcast on iTunes

BUSINESS PODCASTS

Click on one of the play buttons to listen to inspirational interviews with entrepreneurs from SmallBizPod.

SmallBizPod #61 - Levi Roots Podcast

SmallBizPod #61 - Levi Roots Podcast

PostedDetails | PostediTunes
play small business podcast now
SmallBizPod #81 - interview with Laura Tenison founder of JoJo Maman Bebe

SmallBizPod #81 - interview with Laura Tenison founder of JoJo Maman Bebe

PostedDetails | PostediTunes
play small business podcast now
SmallBizPod #43 - European technology startups

SmallBizPod #43 - European technology startups

PostedDetails | PostediTunes
play small business podcast now
SmallBizPod #92 - web startups, shooting for the moon or nailing the business model?

SmallBizPod #92 - web startups, shooting for the moon or nailing the business model?

PostedDetails | PostediTunes
play small business podcast now
SmallBizPod #83 - Duane Jackson interview - SaaS, Drugs and Rock

SmallBizPod #83 - Duane Jackson interview - SaaS, Drugs and Rock 'n Roll

PostedDetails | PostediTunes
play small business podcast now
Sage Sponsors SmallBizPod

Sage Sponsors SmallBizPod

PostedDetails | PostediTunes
play small business podcast now

PARTNER PROMOTIONS

If looking to boost your businesses performance with promotional marketing, travel incentives or incentive schemes get it touch with NDL Group