Is life becoming more affordable?
We’re heading in the right direction in terms of spending as the cost of living, as measured by the Consumer Prices Index (CPI), has decreased in March by a fraction on February after it dropped to – 0.01 per cent. The cost of living is the amount of money needed to sustain a certain level of living, including basic expenses such as housing, food, transport and taxes.
In the short-term, deflation and the falling cost of living is great news for us as our spending power is boosted. But is deflation good long term? The long-term falling of prices can be a problem for the economy, as if you are like me, you may delay purchases until you get a better price. Therefore the demand for goods and services can subsequently cause the economy to shrink.
I am not an economist, though did an A level in economics many, many years ago, so it’s interesting to try to understand all these terms. If you can add anything interesting, please do in the comments.