Inflation of 7.9% the highest since early 90s

The headline annual RPI figure, published yesterday, was 7.9%, which is the highest for the island since 1991, but lower than the most recent published figures of 12.6% for the UK and 10.4% in Jersey.

‘I’ve been in retail for 40 years and I can’t remember a six months like this, in which every cost line has gone off the scale,’ said Tony O’Neill from the retail group which operates Morrisons Daily, Checkers Express, Matalan and Costa Coffee locally.

‘UK food inflation has been running at 14% and, along with other retailers, we’ve been doing our best to protect islanders from that and not pass on the costs.’

He nevertheless acknowledged that price rises this year had been ‘painful’ to shoppers in Guernsey.

Food inflation was 9.6% in the year to September, though this was eclipsed by fuel and light, which rose by 26%, motoring expenditure, which went up by 12.3%, and leisure services, which saw an annual increase of 11%.

The period between July and September saw Guernsey prices rise by 1.5% – slower than either of the two previous quarters – with food prices alone accounting for more than a quarter of that increase.

Richard Hemans, who leads on economics for the Institute of Directors Guernsey branch, noted that the ‘biggest impacts are being felt in food, energy and motoring expenditure – essential costs that affect everyone’.

‘Islanders will continue to feel pressure on their finances with their real earnings declining, thereby undermining their spending power,’ he said.

‘Businesses, particularly those in discretionary sectors, will face the dual challenge of lower sales volumes and rising costs, particularly in payroll and energy, thereby reducing their profits.’

He said the States would have to manage rising day-to-day and capital expenditure, climbing faster than income and deepening the fiscal deficit in the public sector, as well as trying to help islanders through the cost-of-living crisis.

He described Guernsey’s relatively low figure – compared to the UK and Jersey – as ‘important for our relative standard of living, fiscal outlook and competitive position’ but pointed out that housing costs, and interest rates in particular, had been the biggest contributor to Jersey’s latest rate.

‘This means that with the faster, sharper interest rate increases seen in the UK over the last month, much of that impact could yet feed into higher local inflation rates in the coming quarters,’ he said.

IOD welcomes housing costs indices

IoD Guernsey welcomed the introduction of housing cost indices in the latest bulletin, which showed the impact of inflation on different types of household.

‘We look forward to monitoring these over time but note that inflation is broadly similar for nearly all households in the latest quarter,’ Mr Hemans said.

Guernsey’s RPIX figure, which excludes mortgage interest payments, was 8.0% – the highest recorded since the measure was introduced in 1999.