Deflation still at 5.9%

[Cassandra Syndrome]

The serious nature of this horrific statistic never gets stressed by the mainstream media or by any political party.

From CSO

Prices fall by 5.9% in the year to August
Consumer Prices in August, as measured by the CPI, increased by 0.4% in the
month. This compares to an increase of 0.5% recorded in August of last year. As
a result, prices on average, as measured by the CPI, were 5.9% lower in August
compared with August 2008.
The EU Harmonised Index of Consumer Prices (HICP) increased by 0.2% in the
month, compared to no change recorded in August of last year. As a result, prices
on average, as measured by the HICP, were 2.4% lower in August compared with
August 2008.
The most notable changes in the year were decreases in Housing, Water, Electricity,
Gas & Other Fuels (-27.8%), Clothing & Footwear (-13.2%), Food &
Non-Alcoholic Beverages (-4.8%) and Transport (-3.7%). There were increases
in Miscellaneous Goods & Services (+7.9%), Alcoholic Beverages & Tobacco
(+7.7%), Education (+3.9%) and Health (+2.7%).
Services prices fell by 6.8% in the year to August, while Goods fell by 5.0%.
The most significant monthly price changes were increases in Clothing &Footwear
(+3.4%), Housing, Water, Electricity, Gas & Other Fuels (+1.1%) and Transport
(+1.1%). There was a decrease in Food & Non-Alcoholic Beverages (-1.0%).
The main factors contributing to the monthly change were as follows:
 Clothing & Footwear rose due to a recovery in prices following the
traditional summer sales.
 Housing, Water, Electricity, Gas & Other Fuels increased due to
higher average mortgage interest repayments. These were partially
offset by decreases in private rental charges.
 Transport rose due to increases in airfares and petrol&diesel prices.
 Food & Non-Alcoholic Beverages fell due to lower prices across a
wide range of food items.
The CPI excluding tobacco index for August increased by 0.4% in the month and
was down 6.5% in the year. The CPI excluding energy products index rose by
0.2% in themonth and decreased by 5.4% in the year. The CPI excludingmortgage
interest increased by 0.2% in the month and was down by 1.8% in the year.

[HanleyS]

Hopefully plenty more where that came from.

[Libero]

Deflation is both a result of economic forces, and an economic force in itself.

As an economic force, it can have positive effects. One doesn't need a doctorate in economics to work out how falling prices can help an export-focused economy to become more competitive.

But deflation always has a host of predictable negative effects.

This leaves the question of whether or not a bout of deflation in an economy is a good thing. It should be clear this question can only be answered by a rigourous, technical examination and modelling exercise. Even then, there's huge scope for error and underappreciation of how an economy works - especially one like ours that is in crisis and exiting from an asset price bubble.

So if someone says "deflation is good for Ireland", you know you're listening to someone who is not worth taking seriously. They're just guessing or engaging in wishful thinking.

[Fr. Hank Tree]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

[Seos]

Wow monthly inflation in august, didn't expect that!
The problem isn't that we're having a high level of deflation now, the problem is we had (relatively) high level of inflation in the past.
Until we are inline with northern Ireland I do not see deflation as a problem. It would be a problem if we had our own currency.

[zakalwe1]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

what you are actually asking is:
can national income rise while the money supply falls?

the answer is No.

[netron]

Question for economic people: can you have deflation without a shrinking economy? Can GNP or whatever grow while prices go down?

i think you can , with careful manipulation of currency and money supply - if you restrict money supply, theres less money to go round which will push down prices.

another way is to devalue your currency
( 1000 punts is now worth 1 New Punt)

unfortunately, we're in the eurozone so we dont have those tools at our disposal.

[HanleyS]

What alternative is there? It's either deflation or a return to the Punt and devaluation.

[Kevin Doyle]

Wow monthly inflation in august, didn't expect that!
The problem isn't that we're having a high level of deflation now, the problem is we had (relatively) high level of inflation in the past.
Until we are inline with northern Ireland I do not see deflation as a problem. It would be a problem if we had our own currency.

And others say its precisely because we don’t have our own currency that we have a bigger problem within a deflationary cycle.

I think as guessing games go the impact of Deflation is probably the most precarious, on the one hand it provides cover for sweeping cuts, on the other it increase our foreign dept etc etc.

Of course to the average citizen lower prices is always a good thing.

[Seos]

what you are actually asking is:
can national income rise while the money supply falls?

the answer is No.

Oddly enough you are incorrect. During times of great development you can have deflation and (real) growth in an economy but it is very rare.

If you look at growth in the computer manufacturing industry you will see because of the pace of development that there is deflation and growth in the industry but that's just one sector.