Cheaper to buy now for UK firms
GBGC forecasts that it will be cheaper to buy now rather than later for UK companies following the recent fall in the pound.
Inflation according to the Bank of England hit 3.5% in the UK. Economists are split (nothing new there) on whether the global economy is deleveraging and thus lots more deflation is in the pipeline or we are at the start of a new wave of inflation due to printing money.
At times like these it is sometimes best to ignore the contradictory economic forecasts and just observe what is happening to yourself and others on the street.
Looking around the office, our computers, television, printers, in fact everything including the coffee machines was made abroad.
Sterling has fallen 4.3% against the Euro since 4 February 2010, and by 9% against the US Dollar in the last three months.
It figures that the replacement cost of all these items will rise unless the manufacturers of the items wish to subsidise the UK market.
A friend recently wanted to treat himself and buy an expensive watch. At one of the European Airports it was priced at Euros 11,000. He was able to buy the same watch in London for £6,000. The question arises – when the jeweller restocks from the Swiss manufacturer what will the price be?
Our conclusion at GBGC is that prices are going to rise so f you have any capital expenditure it will be cheaper now than later. This does not mean to say that we will have runaway inflation in the foreseeable future. We believe we are returning to the 1970′ period of stagflation when prices rise but are not matched by salary increases, leaving the consumer pinched and careful.