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Deflation Rising

This is a discussion on Deflation Rising within the Economy forums, part of the Issues category on Politics.ie. According to the Irish Times, deflation is rising downwards. "THE ANNUAL rate of deflation rose to 4.7 per cent in ...

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Old 12th June 2009
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Default Deflation Rising

According to the Irish Times, deflation is rising downwards.

"THE ANNUAL rate of deflation rose to 4.7 per cent in May..."


Deflation at level not seen since 1933 - The Irish Times - Fri, Jun 12, 2009
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Old 12th June 2009
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Why don't they publish a non-mortgage inflation index so we can see what the true deflation rate is?

Is it also the case as it was last month that most of the inflation still in the system is being driven by Government?
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Old 12th June 2009
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Quote:
Originally Posted by SamVimesBoots View Post
Why don't they publish a non-mortgage inflation index so we can see what the true deflation rate is?
Firstly that is not be in any way the true rate of deflation because people do in fact pay mortgages so if the cost of mortgages falls then the general cost of living falls.
But they do release CPI - mortgage interest and that is -1.2% for the year.
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Is it also the case as it was last month that most of the inflation still in the system is being driven by Government?
Most no, it wasn't true last mont. Government services (health and education) where and are contributing but those have a low "weight" that is people spend less money on them than other things. Most of the inflation still in the system is insurance inflation. This month alcohol and tobacco also increased (I presume that is government caused?) so including that this month's government caused inflationary effects almost (but don't quite) equal the inflationary effects of insurance.
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Old 12th June 2009
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Quote:
Originally Posted by SamVimesBoots View Post
Why don't they publish a non-mortgage inflation index so we can see what the true deflation rate is?
They do. Its called the HICP. Its a European harmonised index of consumer price inflation. It was -1.7% for the 12 moths to April.
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Originally Posted by kerrynorth View Post
They do. Its called the HICP. Its a European harmonised index of consumer price inflation. It was -1.7% for the 12 moths to April.
karl Whelan has a post on how best to handle mortgages in the CPI

The Irish Economy Blog Archive Deflation and Housing Costs
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Old 13th June 2009
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Originally Posted by Duth Ealla View Post
karl Whelan has a post on how best to handle mortgages in the CPI

The Irish Economy Blog Archive Deflation and Housing Costs
This blog has a graph on it, showing the different rates of inflation across sectors of the economy over the last twenty years.
Deflation - Examining Consumer Prices in Ireland since 1980 | Ronan Lyons

An astonishing level of variability across different sectors, IMO - and interesting to notice education and health leading the charge!
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Old 13th June 2009
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What this means is a very slight drop in the rate of increase of negative equity.

That is different to deflation.

It also means that, if mortgage interest rates rise while the rest of prices continue to fall, the official deflation will stop.
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Old 13th June 2009
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Originally Posted by feargach View Post
What this means is a very slight drop in the rate of increase of negative equity.

That is different to deflation.

It also means that, if mortgage interest rates rise while the rest of prices continue to fall, the official deflation will stop.
Sorry, I don't follow. This discussion was about deflation - falling prices.
Your comment seems to be about negative equity, which is something entirely different (relative sizes of loans and value of houses). Deflation is increasing. One of the elements is not house prices falling (not captured in inflation measures), rather interest repayments for a given loan falling (due to interest rate falls).

Prices in most other sectors also falling, apart from - as per usual - the public sectors, health and education and government-determined prices, alcohol and tobacco.
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Old 13th June 2009
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Quote:
Originally Posted by Scorpio View Post
This blog has a graph on it, showing the different rates of inflation across sectors of the economy over the last twenty years.
Deflation - Examining Consumer Prices in Ireland since 1980 | Ronan Lyons

An astonishing level of variability across different sectors, IMO - and interesting to notice education and health leading the charge!

Revised view of the link - there is no source for the data, and contrary to what the blogger says, there is only a significant fall in the clothing/footwear category. Can anyone make sense of it?
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Old 13th June 2009
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The other problem is that we are in the worst unemployment crisis in Ireland since the Famine, and prices have fallen only slightly from peak.

Put it this way: unemployment is now 130% of the previous worst-ever figure back in the early 90s.

And prices are down what? 6 or 7% from their highest-ever figure in 2007?

Do you see the disconnect?

Prices are up maybe 400% from the last time there were this many unemployed in Ireland.
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