By RUSSEL LYNCH | The Independent – Fri, Apr 27, 2012
High street
sales came off the boil in the first half of April as shoppers stung by rising
inflation shied away from expensive purchases, the CBI warned yesterday.
The organisation's distributive trades survey showed a 6 per cent
balance of retailers saw lower sales than a year ago, deflating rising hopes of
a sustained revival after encouraging sales in recent months. A combination of
glorious weather and a petrol panic gave retailers their best month in more
than a year in March, according to official figures.
There was "solid" growth for clothing
and footwear outlets, but supermarkets came under pressure and car dealers
reported a big drop in year-on-year sales. This came against a backdrop of
renewed worries on inflation, which crept up for the first time in six months
during March.
Judith McKenna, who chairs the CBI's
distributive trades panel, said: "The situation remains fragile. Consumers
are still holding off from buying bigger ticket items, and opting to spend on
smaller 'treat' purchases that give them a lift without breaking the
budget."
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P E R S O N A L R E A C T I O N
The photo above shows a Zimbabwe One Hundred Trillion Dollar
note and small gold bars.
When growth in the amount of money outpaces the number of things there are to buy, people tend to bid prices up – that’s what we mean by the term inflation. And everyone agrees that it is bad. Very bad.
For many years now, inflationary pressures have been present
in our economic system, and in fact in the economic systems of most of the
world. The implications or consequences of this situation are receiving increasing
attention from consumers, so it is only important to control inflation in order to
have an economic stability.
In my opinion, there are many ways to control it. However,
most of them work by either increasing the total supply or decreasing the total demand. If we'll try to look at it in a graph, both actions will result in the equilibrium moving down. The measures that are required to control the
inflation depend on what is thought to be causing it, just like how a
government's monetary policy can decrease the total demand by increasing
interest rates. This will discourage borrowing and increase savings, both of
which constrict consumption, thereby decreasing total demand. Stopping the
printing of money can also be used to control inflation. If a government wants
to decrease it, then it will increase taxation and decrease government
spending. This will result in consumers and firms having less to spend,
therefore coupled with the lower government spending that will cause leakages
to increase and injections to decrease, reducing total demand. Subsidizing the costs of firms will also decrease production
cost allowing them to lower their prices, and reducing inflation. Supply side
policies such as education and training will increase the quality and quantity
of labour available for firms, which will result in an outward shift of the supply curve. This will move the equilibrium down, decreasing price
levels and therefore also decreasing inflation. Other ways to decrease
inflation is to reduce tariffs on imports, as this will lead to lower prices
and therefore lower cost-push inflation. Inflation targeting can lower the
chances of both types of inflation by decreasing the its expectations.
In conclusion, short term measures to control inflation seek
to decrease the demand, whereas long term solutions want to increase the supply. I also believe that with deficit spending, it is possible to control the situation to a good degree. By curtailing the flow of money with no fixing up the rate of exchange, it is possible for the country to create a defensive mechanism against inflation.
High street
sales came off the boil in the first half of April as shoppers stung by rising
inflation shied away from expensive purchases, the CBI warned yesterday.
The organisation's distributive trades survey showed a 6 per cent
balance of retailers saw lower sales than a year ago, deflating rising hopes of
a sustained revival after encouraging sales in recent months. A combination of
glorious weather and a petrol panic gave retailers their best month in more
than a year in March, according to official figures.
Judith McKenna, who chairs the CBI's
distributive trades panel, said: "The situation remains fragile. Consumers
are still holding off from buying bigger ticket items, and opting to spend on
smaller 'treat' purchases that give them a lift without breaking the
budget."
P E R S O N A L R E A C T I O N
|
The photo above shows a Zimbabwe One Hundred Trillion Dollar
note and small gold bars.
|
When growth in the amount of money outpaces the number of things there are to buy, people tend to bid prices up – that’s what we mean by the term inflation. And everyone agrees that it is bad. Very bad.
For many years now, inflationary pressures have been present
in our economic system, and in fact in the economic systems of most of the
world. The implications or consequences of this situation are receiving increasing
attention from consumers, so it is only important to control inflation in order to
have an economic stability.
In my opinion, there are many ways to control it. However,
most of them work by either increasing the total supply or decreasing the total demand. If we'll try to look at it in a graph, both actions will result in the equilibrium moving down. The measures that are required to control the
inflation depend on what is thought to be causing it, just like how a
government's monetary policy can decrease the total demand by increasing
interest rates. This will discourage borrowing and increase savings, both of
which constrict consumption, thereby decreasing total demand. Stopping the
printing of money can also be used to control inflation. If a government wants
to decrease it, then it will increase taxation and decrease government
spending. This will result in consumers and firms having less to spend,
therefore coupled with the lower government spending that will cause leakages
to increase and injections to decrease, reducing total demand. Subsidizing the costs of firms will also decrease production
cost allowing them to lower their prices, and reducing inflation. Supply side
policies such as education and training will increase the quality and quantity
of labour available for firms, which will result in an outward shift of the supply curve. This will move the equilibrium down, decreasing price
levels and therefore also decreasing inflation. Other ways to decrease
inflation is to reduce tariffs on imports, as this will lead to lower prices
and therefore lower cost-push inflation. Inflation targeting can lower the
chances of both types of inflation by decreasing the its expectations.
In conclusion, short term measures to control inflation seek
to decrease the demand, whereas long term solutions want to increase the supply. I also believe that with deficit spending, it is possible to control the situation to a good degree. By curtailing the flow of money with no fixing up the rate of exchange, it is possible for the country to create a defensive mechanism against inflation.
