GUERNSEY’S economy shows no sign of recovery, according to inflation figures released yesterday.
In March the island’s economy shrank for the first time since records began and now that trend has continued with the retail price index – which measures a ‘shopping basket’ of living costs – standing at -1.3% for June. Deflation can in the short-term lead to cheaper prices but in the longer term can bring a fall in the value of assets, affect wage settlements and cause job losses.
However, while the news signalled the island had witnessed deflation for the second quarter in a row – the latest figure dropping from -1.2% in March – (and from 5.5% at the end of June last year), local experts have pointed to the good news about the data.
The RPIX figure, which takes housing expenses out of the overall cost of living calculation, stood at 2.7% – a drop on the previous 3.3% recorded at the end of March – as well as on the 5.4% figure from this time last year.
Yesterday Chief Minister Lyndon Trott (pictured) once again urged islanders to focus on this latest RPIX figure, which he described as ‘core inflation’.
‘I think today’s inflation figures are reassuring,’ he said. ‘Inflationary pressures in the economy have eased. Core inflation has fallen to around 2.7%, which is slightly below our proposed target in the Fiscal and Economic plan.
‘Importantly, food inflation is around 3%.’
According to Deputy Trott, States figures suggest the outlook for RPIX over the next 12 months will be ‘a continuance of a reasonably benign picture’.
Meanwhile Jersey’s economy has dipped sharply. It has dropped below zero for the first time, with RPI standing at -0.4% – down from 2.1% in March. The equivalent figure for the UK is -1.6%.
Deputy Trott put the significant fall in Guernsey’s RPI figure this year down to a direct result of the Bank of England setting a lower base interest rate to help boost the economy.
‘The key reason why our RPI rate and the UK RPI rate is negative is indeed due to the extraordinary movement in interest rates over the last 12 months and that effect will “drop out” of the calculations during the next few quarters,’ he said.
The prices of fuel, leisure and clothing items monitored in the RPI ‘shopping basket’ fell during the year, but nine of the 14 categories increased or remained stable.
Mark Thompson, chairman of the Institute of Directors, welcomed the figures. ‘However, we must be careful not to get carried away with focusing on short-term fluctuations, especially at a time when there is so much change in the economy,’ he said. ‘For Guernsey it is important to look at the longer-term trend, which shows that over the last 10 years Guernsey has had cumulative inflation some 13% higher than the UK. If we cannot halt this trend, then the cost of living in Guernsey relative to the UK will continue to get relatively more expensive.’
Economy to grow, In the States, Page 18
Article posted on 16th July, 2009 - 1.00pm
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