TT records highest inflation rate in more than two decades

PORT-OF-SPAIN, Trinidad (CMC):

Trinidad and Tobago recorded its highest inflation rate in 27 years after the central bank said that headline inflation reached 16.2 per cent in August.

The bank said that the previous highest figure of 14.1 per cent had been recorded in July last year.

"The August outcome represents the highest year-on-year increase since November 1983 when the rate also measured 16.2 per cent. On a monthly basis, headline inflation rose by 2.2 per cent following an increase of 0.5 per cent in July," it said, blaming rising food prices for the increase.

"On a year-on-year basis, food prices increased by 39.1 per cent in August, up from 33.3 per cent in July. The main contributors to food inflation were increases in the prices of vegetables (63.4 per cent), fruits (37.8 per cent), fish (12.2 per cent), milk, cheese and eggs (5.7 per cent), and meat (5.1 per cent)," the bank said.

It noted that over the past few months, the persistent rains and accompanying floods had seriously affected domestic food production in several of the main agricultural areas.

By contrast, there were declines in the subindices for bread and cereals (-3.4 per cent) and oils and fats (-3.3 per cent), notwithstanding the recent rise in global prices of wheat and dairy products.

The bank said that core inflation, which excludes food prices, measured 4.1 per cent (year-on-year) unchanged from the previous month. The data show that core inflation has remained sticky at around four per cent since the beginning of the year, perhaps reflecting weak demand and the existence of much spare productive capacity, the central bank said.

It said private sector credit granted declined for the 11th consecutive month by 6.2 per cent (year-on-year), reflecting the continued sluggish demand conditions in July. The decline was led by the 11.2 per cent fall in business credit.

Small recovery

But the central bank said that consumer credit, staged a small recovery, growing by 0.4 per cent and aided by reductions in mortgage interest rates, real estate mortgage lending had remained relatively robust, increasing by 6.7 per cent on a year-on-year basis.

Recent economic indicators show no signs of a resurgence in activity in the non-energy sector, the bank said, adding that while the presentation of the national budget in September should help in removing some of the uncertainty in the business environment, it may take some time before business confidence solidifies to provide a platform for increased private- sector investment.

Against this background of muted activity in the non-energy sector, rising unemployment, still declining credit demand, and relatively stable core inflation, the bank said it decided to reduce the repo (or overnight lending) rate by 25 basis points to 4.25 per cent to help stimulate domestic demand and private investment.