Guernsey’s Quarterly Inflation Bulletin has shown that Guernsey’s rate of inflation had fallen to 5.3% at the end of June 2024.
Richard Hemans, IoD Guernsey’s lead on economics, commented: “The latest bulletin shows that local inflation continues to decline from its peak of 8.5% during the pandemic. However, it remains high in comparison with pre-pandemic levels and is now above the 2% rate reported by the UK, and likely above the rate that Jersey will report this week (it was 5.7% at the end of March 2024). The annual change in Guernsey’s RPI for the year was 5.3%, which was 2% lower than in June 2023 and 0.5% below March 2024.’
“While Guernsey did not experience the same elevated rates of inflation as the UK and Jersey during the pandemic (the former peaking at 20.2% and the latter at 12.7%), the pace of the decline is notably slower and means that Guernsey’s RPI could exceed that of both the UK and Jersey.
“Given the seasonality of the inflation rate, there is some encouraging news in that the latest quarter is the first since the pandemic to see the quarterly price increase coming in at pre-pandemic levels, which hopefully means that inflation will continue to decrease. The significant increase in electricity prices from 1 July 2024 should not change this because the latest increase is below last year’s.
“The highest annual contributors to inflation were the Housing, Fuel and Light, Household Services, Leisure Services, and Personal Goods and Services categories. These categories made up nearly 80% of the increase in RPI. It was notable, however, that three out of the fourteen categories contributed nothing to annual inflation.
“On a quarterly basis, the highest contributors to inflation were the Housing, Leisure Services, Household Services, Food, and Fares and Other Travel Costs categories. While it is too early to tell if this is a seasonal rather than a structural trend, and therefore not indicative of lower inflationary pressure, the bulletin shows that nine out of the fourteen categories contributed nothing to quarterly inflation.
“Excluding food and energy, core inflation was 4.4% compared with 4.9% at the end of March 2024. The bulletin again highlights the material increase in inflation since the pandemic, with prices increasing by 24% over the last four years, compared with just 13% in the six years before that. The financial cost of the pandemic has been enormous and destabilising.
“The inflation rate of 5.3% came in just below the forecast of 5.5%. Inflation is forecast to fall to 5.1% by the end of the next quarter and 4.3% by Q1 2025. This underlines the slow pace of decline and that inflation will take many years to return to pre-pandemic levels, even without any unknowable further shocks to supply or demand.
“Inflation in Guernsey is being driven by the high cost of housing and labour. The island is an attractive place to live and work, and the supply of housing and labour remains very tight. The States of Guernsey’s focus on providing more housing is exactly right because it will have both long-term economic and social benefits. Guernsey’s rate of inflation is stubbornly high and will likely exceed that of our closest neighbours, which could undermine our competitiveness if not addressed. Falling interest rates and smaller increases in electricity should help to lower inflation. More attention also needs to be given to the supply and quality of labour, which will also help to reduce inflation.”
