INFLATION in the Island is due to fall as a dramatic drop in UK energy prices starts to filter through, experts have said.
The UK yesterday recorded a sharp decrease in inflation – down from a peak of 11.1% in October and 7.9% in June to 6.8% – in another sign that the cost-of-living crisis is beginning to ease.
The drop was largely driven by a reduction in gas and electricity costs, primarily owing to the lowering of Ofgem’s UK energy price cap, which sets a limit on the maximum energy companies can charge.
Experts now believe that Jersey may soon see the benefits, as lower energy costs filter through to lower prices in goods and services imported to Jersey.
But they have warned that as the price cap itself does not apply to Jersey, the Island is unlikely to see the steep drop in inflation recorded in the UK.
Meanwhile, a backbench politician has called for supermarkets to lower prices ‘wherever possible’, as Islanders continue to battle against the cost-of-living crisis.
The latest published data place Jersey’s RPI at 10.9%, down from 12.7% earlier in the year.
In a statement issued yesterday afternoon, the government said: ‘Because the fall has been driven by UK-specific factors (the energy price cap), we shouldn’t expect an equivalent fall in Jersey RPI.
‘Jersey may benefit in the medium term as lower energy costs feed through to lower prices in goods and services imported to Jersey.
‘Indeed the Fiscal Policy Panel’s latest forecast indicates that Jersey RPI inflation is expected to diverge from UK CPI inflation because the UK is now benefitting from falling energy costs.’
Tom Holvey, the government’s chief economic adviser, said: ‘The latest UK inflation decrease, while expected, is still welcome.
‘Jersey’s next inflation figures will be released in October. It is likely that they will show inflation continues to fall.’
Although a drop in inflation will be welcomed by struggling households, overall, prices are still increasing – just at a slower rate than earlier in the year.
However, as reported yesterday, in the UK, some staple goods, such as cooking oil, toilet roll and eggs are beginning to drop in price.
Jersey’s biggest food retailer, SandpiperCI – which runs Iceland, Morrisons Daily and Marks and Spencer – said that ‘where wholesale costs have been reduced by SandpiperCI’s UK partners, those reduced prices have been, and will continue to be, reflected in Sandpiper’s Jersey stores’.
St Helier Deputy and former economic scrutineer Max Andrews said he hoped retailers would lower prices ‘wherever possible’.
‘Supermarkets should do what they can to assist Islanders,’ he added, although he acknowledged that costs were often ‘imported’.
‘I think gradually we will start to see inflation come down,’ he said.
One inflationary factor that appears unlikely to change in the near future is the cost of fuel in the Island.
Pump prices at the forecourt dropped earlier this summer but ATF fuels director Jonathan Best said the company had seen increases in wholesale costs of more than 7% since the start of July.
‘The market has an upward trend at the moment, largely driven by OPEC+ [Organisation of the Petroleum Exporting Countries] cutting production and the exchange rate being more favourable to the US dollar, which also has an effect,’ he added
