For years we have been used to the US economy growing faster than that of the UK and the UK growing faster than the Eurozone. But this year started with things in reverse. All three economies grew, but not by enough to change any central banker’s plans.
Today sees the release of June data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – indicated that output growth was maintained as new orders rose at an accelerated rate. Increased new business led to a build-up of outstanding work, but the rate of job creation eased. Meanwhile, cost inflation moderated and companies raised their output prices for the first time in ten months.
Last month UK CPI inflation dipped into deflation territory for the first time since March 1960. Following two months of no inflation (0.0% y/y) in February and March, consumer prices fell marginally by 0.1% y/y in April. Whilst technically this represents deflation, it is not the same phenomenon that blighted the Japanese economy in its lost decades or that occurred during the 1930s depression. In these instances, sustained periods of falling prices were economically damaging as consumers were deterred from purchasing goods as prices would fall in the future.