Britain: heading for disastrous depression?

The slump in household wealth, loss of jobs and threat of deflation could mean a destructive Japan-style slump taking hold of Britain.

"To believe the noise, we are already in a 1930s-style deflation," said Jeremy Warner in The Independent. But it isn't upon us yet. Inflation is proving stickier than expected. The Retail Price Index, which includes mortgage payments, is weakening fast, falling to an annual rate of 0.1%, the lowest rate since 1960. But consumer price inflation (CPI) merely edged lower to 3%, from 3.1% the month before. And the core rate, excluding food and energy, ticked up to 1.3%. Food prices are still up 11% year-on-year, and it seems that retailers didn't discount as heavily as usual in January, or reversed some previous price cuts, given the deep cuts in December. The cost of games, toys and furniture did not ease as expected, noted Ashley Seager in The Guardian.

Deflation is still looming

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