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Investment deflation – good time for savers
submited on 24.07.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 24.07.2008 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
There is no solid argument for the economic analysis to be based solely on changes in consumer prices. In other words, the popular notion for inflation is just one of the possible indices, reporting change in end prices of a particular, although relatively broad, basket of goods and services.
From the single household standpoint the family budget is allocated either to consumption, or savings. Saving means allocating investments or buying investments assets, whose prices are not followed (and must not be) by the NSI in the familiar basket.
When the political and macroeconomic risk in a country diminishes, this allows for extending the horizon of household planning. In other words, they are forward looking, which implies that saving and investing acquire relatively larger importance than current consumption. There is a similar ongoing process in Bulgaria in the last decade and Industry Watch data for household wealth confirm the presence of such a trend.
Altough consumer prices surged, many other investment assets became cheaper. Company shares on the local stock exchange are falling already 10 months in a row after 5 years of incessant growth.
Growth of housing prices began to decelerate. In some locations and especially with holiday properties in some resorts even nominal decline is being noticed – good news for those wishing to buy now.
If we look outside the Atlantic, deflation is even more significant. It seems that a good period for saving and investing is beginning – or the loss of some is become others’ profit.
From the single household standpoint the family budget is allocated either to consumption, or savings. Saving means allocating investments or buying investments assets, whose prices are not followed (and must not be) by the NSI in the familiar basket.
When the political and macroeconomic risk in a country diminishes, this allows for extending the horizon of household planning. In other words, they are forward looking, which implies that saving and investing acquire relatively larger importance than current consumption. There is a similar ongoing process in Bulgaria in the last decade and Industry Watch data for household wealth confirm the presence of such a trend.
Altough consumer prices surged, many other investment assets became cheaper. Company shares on the local stock exchange are falling already 10 months in a row after 5 years of incessant growth.
Growth of housing prices began to decelerate. In some locations and especially with holiday properties in some resorts even nominal decline is being noticed – good news for those wishing to buy now.
If we look outside the Atlantic, deflation is even more significant. It seems that a good period for saving and investing is beginning – or the loss of some is become others’ profit.
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