A THIRD successive fall in inflation could be giving Islanders “false hope”, Jersey Consumer Council has warned, as it fails to take into account recent price hikes.
According to the latest figures released by Statistics Jersey on Friday morning, the Retail Price Index (RPI) increased by 7.5% during the twelve months to December 2023.
This represented a 2.6% decrease from the figure three months earlier, and a 5.2% drop from the annual rate of inflation of 12.7% measured in December 2022.
Prices are not going down, and costs are still increasing – but the rate of that increase has slowed for now.
Chief Minister-designate Lyndon Farnham said that the rate of inflation was “still too high” and that his new government would commit to “taking immediate action that will bear down on that RPI rate”.
The biggest drivers of the decrease were housing and food costs, both of which had not risen as sharply as in previous months.
Housing costs increased by 16.7% over the last 12 months (down from 26.2% in September 2023), while food costs increased by 5.9% (down from 10%).
Jersey Consumer Council chair Carl Walker, commenting on the latest figures, said: “I would be worried that this may give us false hope, because this figure doesn’t include the period when electricity, water, gas and freight charges have all risen by double digits.”
On 1 January, the price of electricity increased by 12%, and Island Energy recently told customers that an increase of 12% in their gas bills would come into effect at the end of January.
In December, Condor announced that it planned to impose an 18.76% rise in freight costs.
The price of milk also rose by 5% or 7p per litre this month.
Mr Walker continued: “We’ll have to wait and see until April, when we can get a true picture of which way our inflation is going. It is good news that it’s come down, but it still means that prices aren’t going up by as much.”
“There is a strong chance that we will see it go back up,” he added.
“We certainly should not be celebrating that our inflation rate is at 7.5%. Five years ago, that figure would have set alarm bells ringing. The fact that we are labelling an inflation rate of 7.5% as something positive demonstrates just how expensive the last few years have been for Islanders.”
On the constant increases in bills, Mr Walker said: “We do seem to be caught in a never-ending upward spiral where the less well-off continue to get hit the hardest. More and more Islanders continue to struggle, and we’ve recently seen an increasing number of people using foodbanks.”
Deputy Farnham, who is due to present his nominees for ministerial roles by Monday morning, spoke to the JEP yesterday afternoon.
He said: “It is welcome news that the inflation rate is coming down, and this is the third successive fall. It is, however, still too high.
“We are, of course, subject to risks from geopolitical instability, especially on freight costs, and we are expecting energy price increases.”
Deputy Farnham added: “The good news is that interest rates have stalled, because that is what is driving the cost of housing up. We would very much like to see those falling back down over the course of the next year, and one of our top three priorities is to take action that will help bear down on the RPI and we’re going to be giving that our immediate attention.”
He added that his new government’s three priorities were housing, hospital, and the cost of living, but that it was “too early to say what exactly we will do as a new government”.
Housing prices
The cost of housing remained the largest contributor to the rising inflation rate.
However, this increase dropped from 26.2% to 16.7%, which Mr Walker said could be due to a stalled housing market.
He continued: “Interest rates are so high, fewer people can afford the mortgages. As we are now seeing, mortgage rates are beginning to come down in the UK. That should then begin to filter through here and we should see the housing market pick back up.”
Last year, the JEP reported that the number of homes being sold in Jersey had plummeted with a drop in the average cost of a home and the turnover of properties.
RPI(X) is calculated by excluding the cost of mortgage interest payments from the rate of inflation.
Over the twelve months to December 2023, that figure increased by 4.7% – suggesting that without these high rates in Jersey, the overall inflation rate drops significantly.
The government has recently been in discussions with banks “to encourage them to be as competitive as possible”, urging lenders to lower their rates.
Core costs for pensioners
RPI Pensioners calculates the rate as it affects pensioner households, while RPI Low Income calculates how it affects those in the lowest fifth of household income.
Over the 12 months to December 2023, RPI Pensioners increased by 5.1%. RPI Low Income, meanwhile, increased by 4.7%.
While these rates are both decreases from the last report, those on the lowest incomes will still be facing rising costs in 2024, according to Age Concern chair Ben Shenton.
Mr Shenton said: “There is no doubt that global inflation is decreasing, and this trend is expected to continue. However there is also no doubt that the inflationary pressures in Jersey are not being managed and this is affecting many parts of society.
“Two of the core costs for pensioners is food and heating, and pensions are unlikely to keep pace. Massive rises in both of these means the pound in pensioner’s pockets does not go as far, and as a society, we appear to be moving backwards.
“It is the government that is directly responsible for both harbour costs, which affect all imports, and energy costs.”
He urged the government to do “what is best for the majority and the Island as a whole”, adding that the next Chief Minister sits on the Age Concern committee so “we are expecting great things going forward in making Jersey more attractive and affordable for all”.
Food costs
The lowering of food increases was the second-biggest driver of the decrease.
Mr Walker added that sharp increases in food and fuel caused by the war in Ukraine, Brexit and Covid, were still the source of Jersey’s continuous price increases, but that these were starting to relent.
He said: “Food prices are starting to settle as some supermarkets may have found new suppliers, but we’re still caught in that vicious cycle, still riding that wave of initial inflation, even though that wave is starting to slow down a little bit.”
SandpiperCI and Coop declined to comment.
