-Stats Bureau
The Bureau of Statistics says that during the first quarter this year the inflation rate was held at 0.4% by such factors as the contraction in demand, the supply rebound in vegetables and fruits and relatively low fuel prices.
The Bureau in a press release yesterday stated that, “The continued tightening of demand at the start of the year, the quick rebound in the supply to the market of vegetables and fruits and the still comparatively low level of fuel prices relative to what they were during the first quarter this year have therefore combined to constrain the cumulative inflation rate to 0.4% at the end of the first quarter of 2009.”
In its Consumer Price Index (CPI) report for the first quarter of 2009, the Bureau noted the downturn in the global economy which rapidly deteriorated particularly during the latter months of 2008 and early months of the current year and “consequences such as collapses of major financial institutions, layoffs, and downsizing of businesses, especially in the major capitals of the world, resulting in shrinking economic growth and worldwide decline in commodity prices, accompanied by deflationary tendencies due to contracting consumer demand.”
Against that background, the Bureau said that “the related phenomenon of prices reaching their plateau has certainly been pre-eminent in the Guyana economy.” Last year, especially in the second half of the year, the release said, “prices had essentially platformed as consumer demand had effectively met the maximum levels of affordability.”
According to the Bureau, “the slowdown in the increase in prices during the latter half of 2008 as a result of this constraint in demand was further compounded by the rapid deterioration in global fuel prices in the second half of 2008 which has been sustained into the first quarter of 2009.”
And the two predominant components of the consumer basket that significantly affect the inflation rate in any measured period are of course overall food and fuel prices, the latter both for transportation purposes as well as household use, the Bureau observed.
These are the components that have shaped the movement in the inflation rate for the first quarter of 2009 and the first quarter has been profiled by two distinct movements in prices – “an overall increase in January over the December price levels followed by two successive months of overall decreases in the price levels.”
And price levels as measured by the CPI increased by 3.1% in January over December levels, the Bureau stated, citing two factors – food prices which rose by 5.4% and the housing index which rose by 3.6%.
The Bureau also observed that January is a traditionally slow month for consumer spending, coming in the aftermath of spending for Xmas and one major component that suffers from the demand slowdown is food following the traditional stocking up in December.
The fact that in spite of the January reduced purchasing, food prices still rose 5.4% overall was due to increases in the prices of vegetable and fruit products, the Bureau contended.
It said further that all other 11 food sub-group categories recorded downward price movements in January. “It is now well established,” the Bureau continued, “that the inclement weather patterns which started in December and continued into January severely interrupted the supply and availability of vegetables and fruits to the market, and the price hike, particularly of vegetables, underscores its price sensitivity to supply interruptions.”
For the housing index in January, the Bureau said that “the increase of 3.6% was predominantly due to the increase in rental and maintenance costs by 9.4%, particularly due to increases in greenheart and steel prices, but this increase was significantly ameliorated by the decrease in the price of fuel products to the households, namely cooking gas and kerosene by 7.0%.”
Meanwhile, further evidence of the impact on the economy and consumer basket of the continued global slide in fuel prices was noted in the recorded further drop in the cost of gasoline for personal vehicle use by 20.5%, all such decreases combining to partially offset the increase in vegetables and fruit prices and limit overall price increases to 3.1% for January.
Obverse
According to the Bureau, the obverse has occurred in both February and March as the food sub-index recorded a reversal from January, recording a decline from January of -5.7%. This was driven by the turnaround in prices for vegetables and fruits, with vegetables and vegetable products both declining as weather patterns improved and increased supplies of these important food components started to flood the market.
The Bureau pointed out that February, the month of Mashramani, “expectedly saw a pick up over January in spending and not unexpectedly, given the nature of celebrations during the month, there were increases in some related categories, such as the clothing sub-index which rose by 1.6%, and in such sub-items as personal care services which rose by 5.9%.”
And in the month of February too, there was also recorded the first marginal increases in fuel prices from their floor levels in January, fuel and power for household use having increased by 1.3% and gasoline prices by 2.1%. “The overall impact on the consumer basket, driven by the decline in the food component of the basket, was a decline of -2.5% for February, almost reversing the increases recorded for January.
March closely followed the pattern of February with a further -3.4% decline in the food index, prices for vegetable and vegetable products declining further, the Bureau said. This further decrease in the food sub-index for March was offset by an increase in the housing sub-index of 5.1%, primarily due to rent and maintenance costs which increased 7.9% for the month due to increased building materials and paint prices, even though fuel costs for household use declined by -0.7%.
Transport and communication prices also increased 0.7% in the month, mainly due to gasoline prices creeping up a further 3.7% since February.
“The resultant impact of this combination of countervailing price movements in March,” the Bureau added, “has been a further decline in the overall index of -0.1% for that month”.