Some Relief For Consumers Next Year: Economist
Ican see some relief for consumers next year, says ANZ International Economist, Kishti Sen. Mr Sen said the global supply pressure indexes are getting closer to its historical average.
He believed that imported food prices would reduce next year with food inflation heading back below five per cent in the second half of 2023.
Automotive fuel prices are likely to stabilise, albeit at a higher level than we would like, he said.
“You may not see sharp increases that we saw this year but it is difficult to see oil prices falling off a cliff in 2023.
“The oil market in my view is in a fundamentally stronger position to weather a global slowdown than previous economic downturns.
“And that’s because of ongoing supply constraints. You’ve got European sanctions on Russian oil starting and OPEC (Organization of the Petroleum Exporting
Countries) remains committed to restricting supply amid the weak economic backdrop.”
Mr Sen added that on the other hand, the reopening of China could see a one per cent boost to global demand.
Petrol price
Mr Sen said for petrol prices in Fiji to be below $3 per litre, Brent crude has to trade below US$100 per barrel mark.
“So that is not good news for motorists,” he said.
Brent crude is the most traded of all of the oil benchmarks. This oil type is widely used as it is both sweet and light, making it easy to refine into diesel fuel and gasoline.
Inflation
Mr Sen said the published data show annual Consumer Price Index (CPI) inflation in 2022 reached a peak of 5.9 per cent in August. It has since come down and in November the CPI rose 5.2 per cent year-on-year (i.e. November 2022 over November 2021).
However, food and transport inflation are running well ahead of the total weighted CPI inflation.
“Transport costs, driven by higher petrol prices, lifted by 19.7 per cent in November compared with 2021 and food prices were up 9.6 per cent from a year ago.
“Lot of the food inflation is driven by price increases along the supply chain or what economists classify as upstream inflation.”
We’ve all heard about the steep increases in freight costs and high prices of food products through the pandemic. However, Mr Sen said the global supply pressures have eased considerably this year.
“So why is Fiji along with other Pacific island neighbours experiencing large price increases in imported consumer goods. I think it is a case of ‘late-in, late-out’.
“Remember, that import prices really took off at the height of the pandemic (i.e. over 2020 and 2021). And that was driven by higher vessel charter and container freight rates. But the Pacific island countries did not feel the same impact back then. Nonetheless, Fiji along with its neighbours, started experiencing higher container rates from the beginning of 2022.
“This tells me that Fiji was shielded from the escalation in containerised rates over 2020 and 2021 but some of higher costs are now being passed onto importers.”
Hence, we have seen large increases in imported food product prices coming through this year, he said.