The general drop in prices is in favor of consumers, because their purchasing power increases to buy more products, according to Melvin Garita, Deputy General Manager of the Deputy General Management of Strategy at the National Bank.
For the third consecutive month, year-on-year inflation reported a decrease in prices in August and, what is even better, the largest negative index in the last 10 years.
Between August last year and August this year, the prices of goods and services in the basic basket fell by 3.28%, according to the National Institute of Statistics and Censuses (INEC). On the other hand, the accumulated change in the first eight months of the year was -1.87%.
Why is it difficult to see the progress of inflation in your pocket?
The main items that decreased in price were transportation and information and communication services; In the third and fourth place are food and drink, and clothing and footwear.
As these last items drop in price, this reduction should be felt more strongly.
In addition, it should be remembered that the implementation of hybrid work causes a decrease in the need for transportation, so the reduction in transportation prices is felt less in the pocket.
What are the benefits of having deflation?
When inflation is negative, economists call it deflation, because, unlike inflation, which represents when prices rise, deflation occurs when prices in a country fall or decrease.
This overall reduction in prices is a good thing because it gives consumers greater purchasing power.
If there is a moderate drop in some products, such as food or energy, these drops have a positive effect on increasing consumer spending, because they can make purchases and have more resources left. which they can spend on other things.
Deflation also helps promote economic growth and stability by improving the function of money as a store of value and encouraging savings, that is, people save more and buy more goods and services in the future with the same savings.
However, deflation can also have negative effects, especially in economies with more people and companies with more debt, because people have to work more hours or companies sell more. to pay off their debts, this is known as the debt deflation problem.
