jeudi 26 mars 2015
How Deflation Is Actually Lifting European Economies
Posted on 18:36 by nice news
Europeans have been warned for more than a year that an ogre called deflation is stalking their economies. Now the ogre has arrived, and guess what? It's stimulating growth.
The danger of deflation, economists will tell you, is that when prices start falling, consumers curb their spending in anticipation of even lower prices. (Why buy a car now if it might cost less a month from now?) That can send an economy into a downward spiral, as reduced consumer demand leads to lower production and in turn to job losses that drag down consumer spending even more.
But consumers in the euro zone have been buying more, even as the consumer price index has declined for three consecutive months after remaining nearly flat for much of last year. Consumer spending across the 19-nation zone picked up during the second half of 2014 and has continued this year, with retail sales in January up 1.1 percent from December. "There are clear signs that euro zone consumers are currently taking advantage of deflation or very low inflation to lift their purchasing," analysts at IHS Global Insight wrote in a March 25 report. Consumer spending, rising at about twice the rate of overall economic growth, "has been the main driving force for the euro zone economy since mid-2014," they wrote.
Deflation, it turns out, can sometimes be helpful.
The main contributor to Europe's current deflation is a sharp reduction in oil prices, as well as lower food prices. But prices of most other goods and services have remained fairly steady, reducing the temptation fo
The danger of deflation, economists will tell you, is that when prices start falling, consumers curb their spending in anticipation of even lower prices. (Why buy a car now if it might cost less a month from now?) That can send an economy into a downward spiral, as reduced consumer demand leads to lower production and in turn to job losses that drag down consumer spending even more.
But consumers in the euro zone have been buying more, even as the consumer price index has declined for three consecutive months after remaining nearly flat for much of last year. Consumer spending across the 19-nation zone picked up during the second half of 2014 and has continued this year, with retail sales in January up 1.1 percent from December. "There are clear signs that euro zone consumers are currently taking advantage of deflation or very low inflation to lift their purchasing," analysts at IHS Global Insight wrote in a March 25 report. Consumer spending, rising at about twice the rate of overall economic growth, "has been the main driving force for the euro zone economy since mid-2014," they wrote.
Deflation, it turns out, can sometimes be helpful.
The main contributor to Europe's current deflation is a sharp reduction in oil prices, as well as lower food prices. But prices of most other goods and services have remained fairly steady, reducing the temptation fo
How Deflation Is Actually Lifting European Economies
Inscription à :
Publier les commentaires (Atom)
0 commentaires:
Enregistrer un commentaire