Prices lower than first quarter of last year

May 23, 2009 News

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The Bureau of Statistics has released the Consumer Price Index (CPI) figures for the first quarter of this year.
According to the information released by the Bureau, every economy has directly or indirectly been affected by the downturn in the global economy which rapidly deteriorated, particularly during the latter months of 2008 and the early months of the current year.
Global headlines have highlighted the consequences of the global downturn, among them: collapses of major financial institutions, lay-offs and downsizing of businesses, especially in the major capitals of the world, resulting in shrinking economy growth and worldwide decline in commodity prices, accompanied by deflationary tendencies due to contracting consumer demand.
It was noted that the related phenomenon of prices reaching their plateau has certainly been pre-eminent in the Guyana economy.
It was pointed out that in 2008, especially in the second half of the year, prices had eventually leveled off as consumer demand had effectively met the maximum levels of affordability.
The slowdown in the increase in prices during the latter half of 2008, as a result of this constraint in demand, was further compounded by the rapid deterioration in global fuel prices in the second half of 2008 which has been sustained into the first quarter of 2009.
According to a release from the Bureau, the first quarter has been profiled by two distinct movements in prices, thus an overall increase in January over the December price levels followed by two successive months of overall decreases in the price levels.
“Price levels as measured by CPI increased by 3.1% in January over December levels. Two factors were attributable. Food prices which rose by 5.4% and the Housing Index which rose by 3.6%.”
January, it pointed out, is traditionally a slow month for consumer spending, coming in the aftermath of spending for Christmas (this time it was compounded by even more constrained spending due to increased consumer awareness of the realities of the global economic crisis adopting a resultant cautious approach to personal finances) and one major component that suffers in January from the demand slowdown is food, in the aftermath of the traditional stocking up in December.
“The fact that in spite of the January reduced purchasing, food prices still rose 5.4% overall, was due to increases in prices of vegetable and fruit products. All other 11 food sub-group categories recorded downward price movements in January.”
It stated that it is now well established that the inclement weather patterns which started in December and continued into January, severely interrupted the supply and availability of vegetables and fruit to the market and the price spike, particularly of vegetables, underscores its price sensitivity to supply interruptions.
For the Housing Index in January, the increases of 3.6% was predominantly due to the increase in rental and maintenance costs by 9.4%, particularly due to increases in greenheart and steel prices but this increase was significantly ameliorated by the decrease in price of fuel products such as cooking gas and kerosene, by 7.0 per cent.
“Further evidence of the impact on the economy and consumer basket of the continued global slide in fuel prices, was noted in the recorded further drop in the cost of gasoline for personal vehicle use by 20.5%, all such decreases combining to partially offset the increases in vegetables and fruit prices and limit overall price increases to 3.1% for January.”
The release also said that the obverse has occurred in both February and March. The food sub-index recorded a reversal from January, recording a decline from January of 5.7%, this time driven by turnaround in prices for vegetables and fruits, with vegetable and vegetable products both declining as weather patterns improved and increases supplies of these important food components started to flood the market.
It added that February expectedly saw a pickup over January in spending, and unexpectedly, given the nature of celebrations during the month, there were increases in some related categories such as the clothing sub-index which rose by 1.6%, and in such sub items as Personal Care Services which rose by 5.9%.
In February there was also recorded the first marginal increases in fuel prices from their floor levels in January. Fuel and power for household use having increased by 1.3% and gasoline by 2.1%.
“The overall impact on the consumer basket, driven by the decline in the food component of the basket, was a decline of 2.5% for the month of February, almost reversing the increases recorded for January.”
March, it said, closely followed the pattern of February with a further 3.4% decline in the Food Index, pricing for vegetable and vegetable products declining further.
The additional decrease in the food sub-index for March was off-set by an increase in the Housing sub-index primarily due to rent and maintenance costs for household use declined by 0.7%.
Transport and Communication Prices also increased by 0.7% in the month, mainly due to gasoline prices creeping up a further 3.7% since February.
The resultant impact of this combination of countervailing the movements in March has been a further decline in the overall index of 0.1% for that month and for the period of the first quarter, the cumulative effect has been an overall increase in the index of 0.4% since the end of December.
“The continued tightening of demand at the start of the year was a quick rebound in the supply to the market of vegetables and fruits and the still comparatively low level of fuel prices, relative to what they were during first quarter 2008, have therefore all combined to constrain the cumulative inflation to 0.4% at the end of the first quarter of 2009.”

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