Food prices keep inflation high
Jamaica’s inflation is showing signs of entering a mulish phase that will likely not slow the actions of the Bank of Jamaica (BOJ) to cauterise the situation.
While some of the drivers of higher inflation earlier in the year — fertiliser prices, spiking gas prices, some food prices and supply chain costs — are fading, a year of action by the central bank has so far done little to slow the pace of price increases.
And now data from the Statistical Institute of Jamaica (Statin) show prices are no longer rising because a few categories have skyrocketed in costs. Instead, the data show price increases are spreading throughout the economy.
On Thursday, Statin said inflation ticked up by 0.9 per cent from July to August and 10.2 per cent from a year ago. The July to August inflation was the biggest jump in prices since a 1.6 per cent hike in March and the second-largest single month spike in prices since a year ago.
Driving inflation in August was higher food prices. Though at least one producer of chicken meat trimmed prices last month and food producers petitioned their colleagues to pass on lower costs to consumers, higher prices for primary agricultural products such as Irish potato, carrot, onion and pumpkin pushed inflation in August. Increasing too were prices for flour, bread and meat products.
But it is increases in the costs of other items such as furnishing, household equipment and routine household maintenance; health care, recreation, sport and culture; restaurant meals and accommodation; and personal care, social protection and miscellaneous goods and services which will worry the central bank ahead of its monetary policy meetings later this week.
The central bank Governor Richard Byles and the bank’s monetary policy committee have long indicated that though the early drivers of inflation were imported, raising rates since October last year to a nearly 10-year high 6 per cent is aimed at preventing the higher import costs from influencing price increases in other areas. The central when it raised rates in August said it “is prepared to pause” the rate increases “if the incoming data continue to reflect a downward track for inflation”.
But unlike in the United
States where price increases are stoking fears of a recession with economists betting that the Federal Reserve will have to raise its benchmark short-term rate much higher, to 4.5 per cent or above, by early next year, more than previous estimates of 4 per cent (the Fed’s key rate is now in a range of 2.25 per cent to 2.5 per cent), here in Jamaica, the central bank’s rate increases have done little to sap the strength of a recovery which shows no signs of slowing down.
Higher prices have yet to cause much of what economists call “demand destruction” — a pull-back in spending that could quell inflation.
Though gas prices have come down 8.5 per cent since it peaked in mid-june, it is still up 20 per cent since the start of the year and there is little to show that Jamaicans who were restricted over two years of the pandemic from enjoying basic recreation are cutting back on spending, despite the complaints about prices.
Restaurant meals and accommodation prices, for example, jumped 0.4 per cent in August and have risen 19.3 per cent in the past year. But that hasn’t noticeably discouraged people from going out. And though headline inflation is at 10.2 per cent, transport costs have gone up much faster, 15 per cent, while the cost of household furnishings and the like has gone up 10.3 per cent.
Most economists attribute the ability of companies to still charge more to consumers’ willingness to pay and that retailers are now raising prices because they can, not because they have to.