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Retailers hoping for boost

Britain on course for first deflation for half a century

Deflation - discountersBritain could be heading for a period of deflation for the first time in 50 years when figures are unveiled this week.

The supermarket price war and falling energy bills have cut the cost of living, causing inflation to plunge to zero – dubbed ‘noflation’ –  in February.

The statistics office will release the latest inflation figures for March, on Tuesday morning, with economists once again saying it will be a close call between zero and a 0.1% fall.

Petrol prices, which had been heading down, rose 3.6% last month, as oil prices rallied and this will add 0.1 percentage points to the inflation rate.

However, it will be offset by falling gas and electricity prices and discounting by the supermarkets.

Retailers hope the fall in prices and rise in real incomes will encourage consumers to hit the shops.

Businesses generally are being advised to take advantage of the low inflation, low interest rate climate.

In particular they are being advised to invest in their infrastructure and stock, and hedge their fuel bills.

However, business advisers also caution against exhausting cash resources and say it is imperative that they keep a cushion of liquidity within the business should costs take an unexpected turn or fear of deflation leads to a dip in demand.

Some companies are also expected to pay off debts, particularly those with higher rates of interest.

 

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