The Bureau of Statistics says that in the context of this year’s inflation target and in contrast with last year’s first quarter rate of 0.4%, the inflation rate for the first quarter of this year of 0.5% has been “favourable”.
The projected inflation target for 2010, as announced by the finance minister in his budget speech in February, was set at 4.0%.
The bureau in a release yesterday noted that in the Guyana economy, the early months of a new year, particularly the first six weeks of the year from January to mid-February, are usually denoted by significantly reduced demand, especially in the non-food categories as “households and individuals essentially regroup and re-budget in the aftermath of heightened expenditure during December for the Christmas season.”
Unless there are spikes in the food and fuel prices or the introduction of new fiscal measures that have a cost-push effect during this early period, the result is usually “one of a relatively low inflation rate for this early period.”
The first quarter this year has conformed to this pattern, the Bureau of Statistics said, as the economy has recorded an overall inflation rate of 0.5 per cent for the period December 2009 to March 2010.
According to the bureau, two major factors have contributed to the low level of inflation at the end of the first quarter. Firstly the movement of the food sub-index for the first three months has been very moderate at an overall 1.3%, despite the ‘El Nino’ conditions that obtained in the early months of this year.
But interestingly, the bureau said, for some of the food sub-index categories, a mixture of market and weather conditions affected prices.
There were declines in prices of some of the heavier-weighted categories, particularly the significant vegetable products category which declined in price by as much as 12.5% over the first quarter.
And prices for milk and milk products declined by 5.1%, oils and fats by 4.0% and cereal and cereal products by 0.8%.
But in contrast, the bureau noted, price increases were recorded in some other categories with the largest price movements recorded for ‘pulse and pulse products’ which increased for the quarter by 17.0%.
This was predominantly due to the price increases of imported products such as black-eye, split peas, red beans and channa, the release stated. For condiments and spices where prices increased for the quarter by 14.9%, it was again the imported condiments such as garlic, onions, massala, and salt which fuelled that increase.
Meanwhile the price index for fruit and fruit products increased for the quarter by 16.2%, but it was clear that it was the market reaction to shortages of such high-consumption items as bananas, cherries, oranges, dry coconuts and limes as a result of ‘El Nino’ conditions which triggered these increases but this is expected to be reversed once weather conditions become favourable again.
Meat, fish and egg prices also increased by 8.3% for the first quarter, the release added.
In the meantime, fuel prices which have a ‘knock-on’ effect throughout the economy, and directly influence the second and third highest-weighted categories of housing and transport and communication respectively, had just a marginal effect on the movements of these two sub-indices.
In fact, the bureau said, the housing sub-index moved marginally by just 0.1% for the quarter as the fuel components of this sub-index such as electricity rates, kerosene oil and cooking gas remained at their December 2009 levels. In the transport and communication sub-index, gasoline prices increased on average by just 2.5% between December 2009 and March 2010.
However, these movements in food prices were countervailed by the decline in the communication sub-sector of 9.2% as consumers continued to benefit from the robust competition in the communications market, the bureau said.
The overall effect of the opposing movements of these two key components has been a decline of 0.9% for the transport and communication sub-index, the bureau concluded.