Cover of MoneyWeek magazine issue no 725

Cheapest mortgage ever: Profit from record low inflation now

14 January 2015 / Issue 725

Inflation is at a record low and ‘bad’ deflation is off the cards, so make the most of ‘joyflation’ – remortgage at a cheap rate, says John Stepek. Read this week's cover story here.

PLUS:
• The economics of Creme Eggs
• How not to blow your pension pot
• Three reasons to be cheerful in 2015


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Excerpt

Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

The Creme Egg index

“Shell-shocked chocolate lovers launch campaign after Cadbury downsize on Creme Eggs box.” That was the outraged headline in the Daily Mail this week. You can see why. Cadbury cut the number of Creme Eggs in a multipack from six to five, and recommended only a small price move to reflect the change. Most retailers are sticking with their £2 price tag. That’s not all: the firm has changed the chocolate used from Dairy Milk to “standard traditional Cadbury milk chocolate”.

You may not be bothered by this. Perhaps you think that if people paid more than £2 for nearly 1,000 calories of sugar the world would be a better place anyway. But think about it in terms of the direction of prices in the UK and it’s pretty interesting. Getting fewer eggs for the same price is the same as paying more for each egg (7% more under Cadbury’s recommended prices). So at first glance, you’d think this change is a symptom of inflation brewing in the UK.

However, you could also see it as a symptom of a disinflationary environment: if customers won’t tolerate price rises, then the only way for firms to boost profit margins – as shareholders expect them to – is to cut the underlying cost of the products they sell. Look at it like that, and nipping one Creme Egg out of a pack of six is a pretty easy win (however much empty-calorie lovers might whinge on Twitter).

So in this case the price rise might not be about inflation. It might be about the fact that our economy is on the edge of deflation and the consumer knows it.

• Read the full editor’s letter here: The Creme Egg index