DEFLATION.

Falling prices.

This should be a positive, right?

Maybe for some, but there are industries, which have seen prices falling faster than costs, squeezing margins for years and the knock-on consequences are very real.

Inflation, measured by the Consumer Price Index (CPI), hit its lowest level on record in January, down to 0.3 per cent.

Food and petrol prices have been falling and therefore contributed to the reduction from 0.5 per cent in December.

Statisticians believe it may turn negative in spring, but this is expected to be temporary, especially when clothing and furniture prices are rising.

There is no certainty of this of course, just like no one can predict with certainty if the oil price floor has been reached or whether the recent rebound is a one-off.

Earnings growth is slowly rising and consumer purchasing power is improving.

The UK has one of the best economic growth rates in Europe and the lowest unemployment rates globally.

There is a good mix at present and this is reflected in the UK stock market, which reached a 15-year high during last week’s trading.

However, Government Treasury gilts have given up much of their new year rally and have been moving into negative territory for much of February.

Newly issued corporate debt in sterling terms has been weak as companies continue to reduce capital expenditure and deleverage.

Defaults have also fallen well below long-term averages, according to the credit rating agency, Moodys and Investment House, Morgan Stanley, released an interesting note highlighting the declining liquidity in credit markets, both in pounds and euros.

The UK equity market continues to perform despite the warning of economic instability across Europe should Greece not reach an agreement with EU ministers over its bailout programme.

This comes at the expense of volatile trading conditions, leaving the markets not for the faint hearted.

Whatever the outcome, the Greek deal will no doubt require a major sacrifice from at least one or perhaps both sides.

Investment Bank, JPMorgan, believe only €108bn deposits remain in Greek bank accounts, as there continues to be €2bn outflows every week.

At the time of writing, the talks are likely to steal the headlines and we can expect them to go to the wire, or later.

The negotiations are reminiscent of the fiscal cliff/debt ceiling stand-off in the US, which was eventually resolved in the early hours of the day after the deadline, effectively the 13th hour.

Although UK property price data is often skewed because of the North-South divide, things could even out as property developers are said to be moving out of the concentrated capital and landing in cities such as Manchester, Leeds and Newcastle.

National prices are still growing strongly and according to the Office of National Statistics, house prices rose 9.8 per cent in the year to December 2014.

Most people, especially first time buyers, still find it difficult to buy without a large deposit or a high income despite the more favourable rates of stamp duty and falling mortgage prices.

To a degree, for young professionals, the inability to save comes down to high rental prices consuming a large proportion of monthly salaries, resulting in most first time buyers still relying on the bank of mum and dad, for their deposit.

Given the forthcoming unprecedented changes to pension’s legislation following the Chancellor’s Budget in April 2014, the increased flexibility does not mean the next two months are not vital.

Despite the increased options following April 6 2015, the need for expert advice has never been greater.

One way or another, whether this be through world politics, economies or football results, the world we live in today never fails to surprise us. It certainty keeps us on our toes.

Samantha Dolby is an investment manager at Brewin Dolphin and offers advice on a wide range of financial services to private clients, trusts, charities and pension funds.

Past performance is not an indication of future performance. The value of any investment and any income can fall and you may get back less than you invested. No investment is suitable for all people and should you have any doubts you should consult an authorised financial adviser.

The information contained in this article has been taken from public sources and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin. No director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents.