Deflation Continues

Good News Ahead?

Good News Ahead?

According to data from the Central Statistical Office of Poland (GUS), the prices of goods and consumer services fell by 0.2% in December 2015 compared to November 2015. The rate of annual deflation was 0.5%. Deflation is a long-term decrease in the prices of goods and consumer services. In practice, it means that the prices of the products we buy drop month after month, so the purchasing power of money increases i.e. we can buy more for the same price, than in the previous month. Unfortunately, the drop in prices does not include all goods and services. For example, in December 2015, according to GUS, the price of clothing and footwear dropped, but at the same time there was a slight rise in the price of services (by 0.2%). When it comes to our home budget, this continuing decrease in prices is beneficial because we spend less money on a day-to-day basis. It is also a good news for those who do not save money in interest accounts. It is also worth mentioning that long-term negative inflation (deflation) has a negative influence on the economy. Entrepreneurs produce less, prices remain unchanged or fall, profits drop; and companies want to save, rather than invest, which often results in a decrease in the employment rate.


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