Inflation climbs to 7% – the highest since 1991
THE rate of inflation has climbed again to 7%, its highest since 1991, with the warning that it is likely to rise further.
The increase has led the Institute of Directors to warn that local businesses are facing a profit squeeze, as well as there being pressure on public finances.
Figures released by the States show that the RPIX figure, which excludes mortgage interest payments, rose from 5.9% in the first quarter, while RPI has gone from 5.6% to 6.8%. The RPIX figure is the highest since it was introduced into the States’ calculations in 1999.
The rise was expected, with the continuing war in Ukraine seen as being largely responsible for rising fuel and energy costs.
And the local figure is still lower than the UK equivalent RPIX of 11.9%, mainly due to the island being insulated from some of the cost pressures. The electricity cable link with France means that energy prices are not rising as steeply as in the UK.
However, the recent increase in the price of electricity locally, which came in on 1 July, and some other price rises are not captured by the most recent figure, and will likely see inflation rising again this quarter.
High housing costs were also a key factor in the new figure, being driven by high demand and a lack of availability.
Policy & Resources committee treasury lead Deputy Mark Helyar said that while the levels of inflation were significantly higher than in recent years, the fact that it remained below the UK was a bit of good news.
‘Policy & Resources will continue to monitor the impacts of the cost of living, and we’re pushing on with the priorities in the GWP which will help in some areas such as housing,’ he said.
‘For public finances, higher inflation will mean more cost in some areas but it will also mean increased revenues in others, such as document duty from house sales.’
Fortunately, the States had built up some reserves to provide resilience in the event of any ‘short-term surprises’ and it was anticipated that this would be a temporary period of higher inflation and that figures would start falling again ‘in a matter of months’.
Employment & Social Security president Deputy Peter Roffey said the committee would take inflation into account when it goes to the States for approval of next year’s pensions and benefits increase.
‘For right now, there are various means-tested benefits available for people who are struggling to make ends meet,’ he said.
Anyone struggling is urged to contract ESS on 222508 to see if they are eligible for income support, help with medical expenses or the cost of school uniform.
n The last time inflation was higher than 7% was at the end of June 1991, when the rise in the cost of living stood at 8.7%. RPIX was introduced in 1999.
P&R president defends housing moves, page 2
Inflation reaction, page 4
