Deflation

[imron]

Yesterday when eating lunch at a local restaurant, I noticed 1-2 kuai had been knocked off the price of all items on the menu. Has anyone else noticed deflation happening?

[peekay]

I was shopping for boots a few weeks ago and noticed that shoes and other clothing items were being sold at steep, steep discounts -- even for Chinese standards. I haven't noticed cheaper food prices yet (at least not at my local supermarket.) Reportedly Feb CPI was down 1.6% compared to the year before.

Whether this is actually "deflation" is anyone's guess right now (deflation defined as a sustained drop in prices, rather than a temporary one.)

[randall_flagg]

The news picked up on deflation in China about three days ago. However, although prices seem to be falling, there is one significant element that makes this drop in prices very undeflation like: credit volumes are expanding -- instead of contracting, which would happen during a regular period of deflation.

Let's hope it doesn't turn into "real deflation". Never.

[gato]

I was able to buy a one-way ticket from Beijing to Shanghai on Shanghai Airlines for about 360 yuan in February (70% discount from face value). That seems like deflation.

The banks are lending because they are under government order to lend, but they are probably lending mostly to SOEs and local governments rather than to the private businesses that like are going belly up. Some of the money apparently has gone into the stock market leading to a big rally in February. That's the beauty of having nationalized banks.

[randall_flagg]

Yeah, most of the lending is (indirectly or directly) induced by governments. And although I am against nationalizing banks -- well, sometimes, sometimes it just might be better...

[adrianlondon]

Flight tickets are going down everywhere (people aren't travelling, businesses are using economy class, fuel is getting cheaper); it doesn't mean that deflation has set in.

I always thought people in Beijing kept moaning about how high the prices got around the Olympics; isn't it just going down a bit to make up for that?

[gato]

Rent's coming down, too. Hurray!

[imron]

isn't it just going down a bit to make up for that?

Whatever the reason, it's still welcome

[Scoobyqueen]

Lufthansa was doing a special deal Frankfurt-Beijing for 385 Euros including the tax (which is normally 240 Euros). Never seen it that cheap before. Normally it is at least 500 something.

Last two flights to the US have still had a significant number of seats available and plenty of C-class upgrades possible which is unusual for a quality airline.

[adrianlondon]

My flight on BA a few weeks ago (Stuttgart to HK, Beijing to Stuttgart, both via LHR which I wanted) was around 550 EUR, which they reduced to 425 EUR about a week later, the sods. I shouldn't have checked but I can't help myself ;)

Flight to HK was pretty full but the one back from Beijing was very quiet. I picked a row of four seats and had a great night's sleep.

[peekay]

Spring is also the lightest travel season of the year, so lower prices will reflect that. This time last year Air Canada offered two-months of unlimited travel within North America plus one roundtrip international ticket (from anywhere in Canada to Shanghai, London or Paris) for ~ CAD$1400 including all taxes and fuel surcharges. That, was cheap... I flew somewhere new every week.

This year, it's not certain that base airline ticket prices will come down significantly, but the total ticket cost should be cheaper thanks to the lowering (or elimination) of fuel surcharges. Typically airlines rather cut capacity than allowing prices to fall too far, as they need good operating margins to survive.

Then again check out AirAsia X: London to Malaysia for £99 each way.