Italy is in deflation, the first time in over half a century: there is nothing to worry about – The Technical School

Bad news from the Istat: provisional data indicate, the average of the twelve months, a fall in consumer prices of 0.1% compared to the previous year.

the One in 2016 that is a worrying enough to say that this is the first year of deflation for Italy over half a century, since 1959.

The price of oil to a minimum and the fuel consumption and the weak are as well managed where not even the long years of the crisis had been: to bring inflation below zero in eight out of twelve months.

But what is deflation? "It is a problem that is definitely the most treacherous inflation – explains Forexinfo -: the general decline in prices may in fact appear as a good thing, especially after decades of demonisation of inflation. In reality, deflation can trigger a vicious circle that feeds itself and in the long run, it’s bad for everyone: the falling prices generate expectations of further declines in future prices, this leads individuals to postpone purchases (everyone thinks “if I wait it will cost less”), and the sum of these general expectations, involve a general reduction in consumption. The paradox in a situation where purchases become cheaper, people don’t buy it!".

“A drop in consumption leads to an impact on businesses that they see is the margins that the revenues decrease and they are forced at some point to lay off or even close: at this point, we have new unemployed people who do not have more income to spend on consumption, thus giving new fuel to the process of the destruction of the economy”.

“A second undesirable effect of the deflation concerns the debts, devaluing the currency, inflation helps the debtors to repay their debts going to decrease in real terms, the value to be reimbursed, a sort of “discount” on the interest to be paid”.

The conclusion is pessimistic: "the deflation is unfortunately a spectrum of heavy hanging over our heads: Japan is the victim of a historic crisis of deflation and is trapped already by the '80s in a cage deflattiva from which they are not able to get out".

on Returning to Italy, hope the figure that starting from November, prices are back on the rise, but not enough to overturn the result of the entire year. In December, then, the rate of inflation reached 0.5% in the provisional data, the level increased by two and a half years, from may 2014.

it Is, however, given far from that of the whole of the Eurozone, where the prices are growing at double speed (+1,1%), and also from the european central Bank target of inflation close but below 2%.

Confesercenti and consumer associations Federconsumatori and Adusbefi have no doubt that deflation is “bad news”. Also, according to the Codacons, the consumption fell to 80 billion in the eight years of the crisis.

On the other hand, the office studies of Confcommercio estimated that the inflation will reach already at the January values close to 1%, and sees this as a possible brake on the purchasing power of the families”.

To the secretary general of the Uil, Carmelo Barbagallo, you have to raise the question with “the stability of governments in order to tackle austerity and to propose the development”. While Federdistribuzione asks for policies to support consumption.