What's so bad about deflation?

Although lower prices may seem like a good thing, deflation can in fact be highly damaging to the economy. Deflation can lead to a vicious circle for the economy since it can drive down spending and investment, which in turn would lead to lower economic growth and higher unemployment.

Is the UK at risk of deflation?

Deflation looms in the UK, and its potential impact on the economy is becoming a growing concern. Recent data shows that in December 2025, UK shop prices saw their sharpest decline in over 3 years, with annual shop price deflation reaching 1%, up from 0.6% in November.

Who benefits from deflation?

During deflation, lenders gain because the money they get back is worth more, while borrowers suffer as they owe more in real terms. It's like lending 5 candies and getting back 7.

Why is deflation worse than inflation?

Compared with inflation

Whereas inflation encourages short term consumption and can similarly overstimulate investment in projects that may not be worthwhile in real terms (for example, the dot-com and housing bubbles), deflation reduces investment even when there is a real-world demand not being met.

Which country has deflation?

China is a perfect example of an economy with deflation or dangerously low inflation.

What If Inflation Goes Negative? Deflation Explained

Would deflation cause a recession?

The Bottom Line. A little bit of deflation is a product of, and good for, economic growth. But, in the case of an economy-wide, central bank-fueled debt bubble followed by debt deflation when the bubble bursts, rapidly falling prices can go hand-in-hand with a financial crisis and recession.

Is China in deflation?

China's deflationary slide is worsening as companies spiral into price wars. There's a pattern in China: companies rush into an industry, then resort to discounts to stay afloat. "On the surface you're dominating, but deep inside you're paying a high price to dominate," an economist said.

Is Britain facing a financial crisis?

After a succession of shocks – from the 2008 financial crisis, to Brexit and the Covid pandemic – the UK's national debt has risen to the highest level as a share of GDP since the 1960s. The return of high inflation and the end of rock-bottom interest rates has made servicing those debts more expensive.

Are people in the UK struggling financially?

One in 10 working-age adults are juggling low income and debt, insecure tenancies and high rents, and problems accessing NHS care.

Are we in a cost of living crisis in 2025?

And the effects of the cost of living crisis are still with us, with the prevalence of food insecurity in January 2025 still twice as high as it was in 2021.

Why is living in the UK so expensive?

High land prices mean higher rents and higher wage demands, both of which push up costs for retailers. Then they have to charge more for their goods and services. VAT, at 17.5 percent, is much higher than the sales taxes in the US. High fuel duties don't help either, since most goods have to be transported.

Is Germany in recession?

Takeaways by Bloomberg AI

Germany's economy succumbed to a recession in late 2022 and didn't grow for the two years that followed, according to revised statistics. The updated series reveals six declines in output over seven quarters, interrupted only by stagnation in the summer of 2023.

Why is China falling?

Domestic challenges

First, the country continues to suffer from sluggish consumer spending – at around 40%, this is significantly below the level in many advanced economies as well as in China's middle-income peers. Indeed, figures from late April revealed the biggest drop in export orders since the Covid-19 pandemic.

Is inflation good or bad?

High inflation is bad for you because it can lead to an unsustainable and wild economic environment where the cost of products outpaces your paycheck. Low inflation means an economy is stagnating and paychecks may fall, making it harder for you to spend.

Who benefits during deflation?

On its face, deflation benefits consumers because they can purchase more goods and services with the same nominal income over time.

Is bitcoin deflationary?

Mining difficulty has increased substantially[1], and as a result, each new BTC is increasingly expensive, making BTC deflationary. As the overall supply decreases, the intrinsic value of the currency increases, and its purchasing power goes up accordingly.

Should we be worried about deflation?

Possible Effects. There are many reasons to be concerned about a prolonged deflationary period, even without an event as devastating as the Great Depression: Demand for goods decreases since consumers delay purchases, expecting lower prices in the future.

Who will be the biggest economy in 2050?

The Future Economic Giants: Largest Economies in the World 2050. China: With its fast economic growth and development, China is all set to lead the world's economy.

Is the UK in a recession?

The economy had fallen into recession at the end of 2023 but rebounded in the first half of 2024. Since then, growth has been sluggish.

What country has the best economy?

Is the UK in recession in 2025?

As things stand, the consensus among economists is that the UK will avoid a recession in 2025, albeit narrowly. The UK economy grew by 0.7% in the first quarter, so it would take two consecutive quarters of negative growth from here for the country to have entered recession.

Is Ireland in recession?

Ireland is not heading towards recession, says Finance Minister Paschal Donohoe, though we have taken a hit from Trump's tariffs. The Irish economy is not heading towards recession, despite the effect of tariffs placed on exports to the US by the Trump administration, a Department of Finance report forecasts.

How does France make money?

What is France's main economic sector? The main economic sector in France is the services sector, which accounts for about two-thirds of GDP. This includes activities such as retail, tourism, financial services, and government spending. However, industry also plays an important role in the economy.

Where is the cheapest place to live in the UK?

Is it cheaper to live in the UK or America?

Is it more expensive to live in the US than in the UK? On average, it is more expensive to live in the US due to a number of factors including transportation, healthcare costs, living expenses and more. US citizens are roughly one third richer than UK citizens.