Richard Hemans, Guernsey IoD’s lead on economics, noted that Guernsey’s headline rate of inflation continues to decrease and is significantly lower than the rates in the UK and Jersey.
His comments came after the release of the latest Guernsey Quarterly Inflation Bulletin that showed Guernsey’s rate of inflation had fallen by 0.3% to 7.0% at the end of September 2023.
Richard Hemans (pictured) commented: “Guernsey’s headline rate of inflation continues to decrease, registering the third consecutive quarter of decline.
“Although this quarter’s fall indicates the pace of decline may be slowing. Indeed, inflation was higher than the 6.5% forecast by the States of Guernsey Policy Unit and suggests inflation will struggle to drop below 5% by the end of the year.
“However, core inflation excluding food and energy also decreased to 5.7%, which suggests that the moderation in inflation is broad-based, and Guernsey continues to enjoy a significantly lower rate of inflation than the UK and Jersey (10.6% and 10.1% respectively).
“Housing and Food continued to be the largest contributors to the annual rates of inflation, whilst Household Services (communications, cleaning etc) and Leisure Services (entertainment, holidays etc.) were also significant. Housing costs increased by 11.4% and Food by 9.6%, contributing 1.9% and 1.2% respectively, or nearly half of the 7.0% RPI figure. These increases remain very elevated, albeit lower than previous quarters.
“The price of these essentials underlines the pressure that household budgets are under. Fortunately, the quarterly RPI figures suggest the pressure is easing in these categories and whilst future inflation could be driven by the heat and light category, the general trend remains downward, particularly as interest rates, the main driver of the Housing category, are likely to have peaked.
“Real household incomes are likely to be stagnant at best on the back of these inflation figures, which means that consumer spending is likely to remain subdued for now. The cost of housing and food remains a challenge for the less affluent and will certainly be contributing to widening inequality in the island. The tightening of the labour market is insulating consumers from inflation to some extent, but there are signs it is loosening whilst labour shortages and costs will weaken business profitability.
“These inflation figures suggest that the local economy remains relatively strong and economic growth is positive, but there are early signs that it is starting to slow down. We remain in a better position than many other jurisdictions, with inflation and interest rates falling or stabilising, but the urgent need to address the looming fiscal deficit is the main risk our economy faces.”