UK 'should be worried' by small shop price deflation

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UK 'should be worried' by small shop price deflation

Fri 11th Sep 2009

The shop price deflation at the moment is a worrying sign for the UK economy, according to an industry expert.

David Kuo, head of personal finance at Fool.co.uk, suggested that it is an indication of too much supply and not enough demand, which will inevitably lead to the lowering of prices.

He pointed out that the Bank of England's policy of lowering interest rates and printing money - or quantitative easing - is not having the desired effect.

"It's to try and get people out there spending money again. But it's not working, it's not happening, because people are still not spending money," he explained.

Mr Kuo compared the situation to treating a patient with a vaccine and not getting a response, explaining that sooner or later if things do not get any better they will need surgery.

He made his comments in response to the news that there had been deflation in the BRC-Neilsen Shop Price Index for the first time since February 2007 - it dropped by 0.1 per cent.

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