The return to negative inflation was attributed to a smaller than usual rise in clothing prices and falling motor fuel prices, amongst other factors. The figures are particularly significant as the annual increase of some benefits, public sector pensions and the state second pension is linked to the September CPI rate. As a result of this negative inflation figure, most benefits (excluding the state pension) will be frozen from April 2016.
But what does negative inflation mean for your business and does it matter? Negative inflation can be a dramatic headline, but inflation has been at or close to zero for some time so this is only a minor change. On the one hand, it does mean that household income is likely to remain static with neither wages or benefits likely to increase significantly. But with falling fuel prices and other factors, some consumers may be feeling the benefit and could therefore have more money to spend.
It does mean that it is likely to be difficult to put any prices increases through on your products or services, however you are unlikely to be expecting any increases from your suppliers, so your costs of goods and profit margins should remain the same. If you are looking for ways to increase your profits then new products or services at higher margins, or new customers/contracts are likely to be more lucrative options to explore.
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