The rise in prices, measured by the Retail Price Index, has been slowing since December 2022, when it peaked at 8.5%.
RPI, which is used to track the rate at which prices for goods and services rise, hit a low of 3.3% last September, and although it went up by 0.1% the next quarter, the rise of 0.6% over the last three months will be seen as worrying news.
Retailers and experts across the island all pointed the finger at events in the Middle East and its effects on global oil prices.
The oil price has seen sharp swings since the start of the US-Israel war with Iran.
Before the conflict began, the price of Brent crude, the global benchmark for oil prices, was around $73 a barrel. It currently stands at about $110, although it has been as high as $123 this month.
Andrew Whiteway of Whiteway Motors said the situation was ‘crazy’ for fuel retailers.
‘I keep my fuel at the price of the shipment it comes in,’ he said. ‘There was one week I doubled my takings as the fuel was going up across the island in reaction to the barrel price.
‘We’ve caught up now with the others. I’m at 171.5p per litre at the moment and I’ll stay there till the next shipment, but where will the price go then? Somebody’s making money somewhere. I can’t see an end to it, and we don’t know if it will end in actual shortages.’
The RPI sorts goods and services into 14 different areas, with 13 of them seeing increases over the past quarter.
Despite the rise in oil prices, motoring expenditure only saw a modest increase of 1.6% over the quarter.
The two biggest drivers of the increase were housing costs, including rents and mortgages, and the fuel and light category, which increased by 9.6% despite no change in the price of electricity, gas or coal. It was completely driven by spiralling costs in heating oil.
Food was up 2.1%. Forest Stores co-owner Keith Bienvenu felt that was slightly higher than he was seeing at his own store.
‘We are being being hit by fuel surcharges on freight at the moment and trying to absorb those costs,’ he said. ‘At the moment it is anyone’s guess as to what will happen next. If oil prices come down or stabilise then we might see inflation fall.’
Jason Hamon, owner of Surf & Turf on Castle Pier, also blamed fuel surcharges on freight for increases within his own store.
‘Its the main driver, we haven’t had many increases for other reasons,’ he said. ‘You would need a crystal ball to work out what will happen next, but as prices go up wages go up and that adds to labour costs which pushes prices up. We just have to ride out the storm.’
UK inflation rates are published monthly. March’s figure was 3.3% and experts are predicting a rise closer to 4% for April.
Interest rates are one of the primary tools central banks use to control inflation. The relationship is generally inverse, with higher interest rates used to push inflation down.
The Bank of England is due to reconsider the UK’s base interest rate later this week. Despite inflationary pressures it is currently predicted to remain at 3.75%.
Pierre Blampied from mortgage brokers SPF Private Clients said his gut feel was also that interest rates would be held.
‘Prior to the Iran debacle we were on a downward cycle with interest rates but that has obviously been impacted and I think we may see them go up before coming back down again,’ he said.
‘It’s a really difficult time and in conversations with clients on mortgages its coming down to affordability and attitude to risk. Until the Middle East situation is sorted out it is difficult to predict anything.’
The only area in the inflation shopping basket that saw a decrease was fares and other travel, which was attributed primarily to seasonal effects, which Jamie Blondel, chairman of the Guernsey Association of Travel Agents, agreed was largely responsible.
‘Next quarter it will probably go the other way,’ he said. ‘It is a worrying time for the sector as there has been lots of talk over price and shortages of aviation fuel. We are having questions about this from consumers, but no one is panicking just yet as there have been no concrete announcements.’
One holiday option that has seen a fall in demand is Dubai.
‘It was a popular destination for islanders,’ he said.
‘Now although we still have flights going through there, the holiday bookings have completely stopped.’
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