Richard Hemans, Guernsey IoD’s lead on economics, says that the latest Guernsey inflation figure of 7.3% is good news on many levels.
This follows the release of the latest Guernsey Quarterly Inflation Bulletin that showed Guernsey’s rate of inflation had fallen by 1% to 7.3% at the end of June 2023.
‘This was the second consecutive quarter of decline, and the rate fell faster than the previous quarter. The forecast was a rate of 7.5%, so the decrease has exceeded expectations and confirms inflation is headed towards 5% by the start of 2024.
“Core inflation, excluding volatile food and energy costs, decreased from 6.3% to 6.0%. Guernsey’s RPI is now significantly lower than Jersey’s and the UK’s, which still have double-digit rates of 10.9% and 10.7%, respectively.
“The Housing, Food and Leisure services categories were the biggest contributors to annual inflation and increased the most in price year on year. The price of Leisure services (holidays) and Housing (interest rates, rent) accelerated from Q1 2023, but the rate of Food price growth slowed from 12.8% to 11.4%. Downward pressure on the annual rate of inflation was exerted by the Food, Fuel, Household Goods, Motoring expenditure and Fares categories, offsetting the upward pressure from the Household and Leisure services categories.
“Whilst the fall in inflation will bring some welcome relief for consumers, businesses and the States and enhances our competitive position against the UK and Jersey, the rate is still elevated and above the levels reported in other parts of the developed world such as the US and the Eurozone. private and public finances will remain under pressure because of high inflation and interest rates, although inflation will likely continue to drop.
“The large fall in inflation may indicate that economic activity is weaker than expected, which is consistent with the latest data from the UK, where the labour market and economic activity are showing signs of slowing, as evidenced by the latest employment, consumer confidence and PMI data.
“Next week’s Guernsey employment and earnings data will be interesting to understand the financial health of workers and businesses, but an economic slowdown, whilst not positive in itself, should at least mean lower inflation and lower interest rates.”