December Stats Show Abating Inflationary Pressures
The year 2020 has undoubtedly left an indelible mark on the course of history. The outbreak of the pandemic had not only disrupted livelihoods and trade flows, but had wreaked havoc on the economic fundamentals world over, forcing policy-makers to venture into uncharted waters to provide support to their crippling economies.
Of the many economic impacts, inflationary pressures too is one of the key concerns for many policy-makers.
Beyond being a symptom of recession, weak price growth or outright deflation also makes it challenging for the world’s biggest central banks, many of whom have for years failed to reach official inflation targets.
The term “inflation” is commonly described as an ongoing rise in the general prices quoted in units of money or in other words, an ongoing fall in the overall purchasing power of the monetary unit.
When prices of goods and services are on average rising, inflation is positive.
However, this does not mean that all prices are rising, or that they are all rising at the same rate. Deflation, conversely, is the general decline in prices for goods and services, indicated by an inflation rate that falls below zero percent. It occurs when too many goods are available or when there is not enough money circulating to purchase those goods.
As a result, the price of and services drops.
Both - inflation or deflation - can be potentially unfavourable for the economy, depending on the underlying reasons and the rate of price changes.
In Fiji, there are two measures of inflation. One compares the average CPI over the past twelve months with the average CPI over the previous twelve months while the other compares the CPI in the current month with the CPI in the comparable month of the previous year.
In the latest release by the Fiji Bureau of Statistics, the average annual rate of inflation for the twelve months to December 2020 [i.e. comparing the average CPI for the 12 months from January 2020 – December 2020; with the average for the 12 months from January 2019 – December 2019] stands at -2.6 percent while the month- on- month inflation rate goods [compared with December stands at -2.8 percent.
The All Items CPI for the month of December registered an increase of 0.2 percent over November 2020 [110.2] and stands at 110.4. Details of price changes between November 2020 and December 2020 by expenditure class are as follows:
Food and non-alcoholic beverages increased by 1 per cent. Higher prices were recorded for bread and cereals, meat, milk, cheese andeggs, oils and fats, fruit, vegetables and non- alcoholic beverages such as coffee, tea and cocoa and mineral water.
■ Housing, water, electricity, gas and other fuels rose by 0.3 per cent. Higher prices were recorded for house paint and gas.
Alcoholic beverages, tobacco and narcotics was down by 0.7 per cent. 2019]
Lower prices were recorded for spirits, wine and yaqona.
Clothing and footwear by 0.4 per cent.
Lower prices were recorded reduced for garments footwear.
Furnishings, household equipment and routine household maintenance decreased by 0.8 per cent. Lower prices were recorded for furniture and furnishings, major household appliances whether electric or not, small electric household appliance, major tools and equipment and non-durable household goods.
Recreation and culture reduced by 0.5 per cent. Lower prices were recorded for equipment for the reception, record and reproduction of sound and picture and equipment for sport, camping and open air recreation.
Miscellaneous goods and services was down 0.4 per cent. Lower prices were recorded for other appliance, articles and products for personal care. No price changes were recorded and shoes and other in Communication, Education and Restaurants and hotels division, and while there were some price changes recorded in Health and Transport division, but these changes balanced out.
Our headline inflation rate has remained in negative territory since October 2019; for more than a year now and is expected to remain subdued for some time.
It is likely that inflation will remain in negative territory for the first half of 2021 with some pick up towards the later part of the year as the global economy picks up from the impact of Covid19 through higher commodity prices.
Another factor that may impact inflation in Fiji is damages to fresh fruits and vegetables by natural disasters.
When prices of goods and services are on average rising, inflation is positive. However, this does not mean that all prices are rising, or that they are all rising at the same rate.
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