On Wednesday, the UK Office for National Statistics announced that the UK inflation rate had fallen dramatically. This announcement from the world’s fifth largest economy comes in the wake of news that the U.S. Consumer Price Index had fallen by the fastest rate in 60 years.
As reported in the UK Telegraph, UK inflation plummeted from 5.2 to 4.5 percent in October alone. What was most worrying was that the rate decline was broad-based and not confined to fuel.
At this rate, the UK economy will begin deflating sometime early next year.
The Bank’s Monetary Policy Committee slashed its official borrowing rate by an unprecedented 1.5 percentage points to 3pc this month in a bid to prevent the likely recession deepening, but experts suspect it will have to reduce them yet further imminently as the UK lurches towards a possible depression.
The pound has fallen to record lows against the euro and recent multi-year lows against the dollar in recent weeks, but a leading MPC member warned that sterling’s slump is unlikely to prevent inflation falling down beneath the Bank’s target.
Tim Besley said: “Inflation is likely to fall below target next year, notwithstanding upward pressure on inflation from the continued fall in the value of the pound.”
Note the open use of the ‘D’ Word – that’s right, depression.
In other UK news – bad news, that is – Marks & Spencer announced that it will cut all non-food store prices 20% for one day in a bid to attract shoppers. This comes as other retailers are seeing sudden, sharp reductions in retail sales:
The country’s biggest clothing retailer will host a “one-day spectacular” tomorrow, according to industry sources. All items, except for food, will be discounted.
It will join Debenhams, which is holding a three-day ‘Christmas Event’, from Wednesday to Friday, with prices cut by 25 per cent on most lines and furniture prices slashed in half. Bhs, Gap, WH Smith and other retailers are also discounting heavily this week.
Investors clobbered shares of UK ‘high street’ retailers this week as Woolworths announced that it was contemplating selling its entire 800-store operation to Hilco for the sum of one pound, depending on how much of Woolies debt Hilco is willing to assume.
That’s right – one lousy quid.
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