BOJ predicts minimal impact of Christmas on cost of living
Published:Sunday | December 25, 2011 | 12:00 AM
Avia Collinder, Business Writer
Consumers who might have noted that goods and services began costing more in the run-up to the season of goodwill, especially the food segment, are being told by the Bank of Jamaica (BOJ) that the cumulative effect of price movements will be negligible.
With no recent adverse weather events, the uptick in prices overall should not lead to a marked increase in the cost of living, the central bank says.
"For 2011, the average monthly increase in inflation for the January to October period was 0.5 per cent, and it is not anticipated that the average monthly inflation for the rest of the calendar year will be out of line with recent trends," said the central bank's research division.
"In fact, the recent out-turn for November 2011 was 0.4 per cent - November 2010 out-turn was 1.0 per cent - giving a calendar year to date inflation of 5.6 per cent, compared to a corresponding measure of 5.8 per cent as at November 2010," the BOJ said via email.
Consumers have been reporting increases in the price for fast-food meals, and some grocery items.
The BOJ said on Wednesday that, absent shocks to the economy, such price movements are based on rising demand in the traditionally high-shopping season.
"Higher prices at this time may be related to seasonal demand, associated with the Christmas holidays and/or an adverse supply shock caused by bad weather. As with any other time of the year, an increase in demand and/or a reduction in supplies will result in upward price adjustments. Consumers will face higher prices in these scenarios which may limit how much they can buy, given that their incomes are fixed," the bank said.
The December uptick is normal but not dislocating, the BOJ advises.
Over the past four years, average monthly inflation for November and December was 1.2 per cent, while the monthly average for January to October was 1.1 per cent.
Years in which inflation was highest for the November and December period were 2007 and 2010, but data shows that traditionally December, in particular, is often among the least inflationary periods.
"Price developments in 2007 were significantly affected by Hurricane Dean and a surge in international commodity prices. In 2010, the impact of Tropical Storm Nicole affected prices in these months," the Central bank said.
The largest price increases that typically occur in the last two months of the calendar year are more often within the food and non-alcoholic beverages division of the inflation basket, particularly among the meats sub-group.
Trend figures suggest that meat prices typically increase the largest during the months of November, December, January and February.
Additionally, noticeable price movements are observed for 'vegetable and starchy foods' as well as the components 'sugar, jams, honey, chocolate and confectionery' and 'food products', all of which are components of the food and non-alcoholic beverages division, the largest segment of the Consumer Price Index.
"While the meats and sugar-related items may be related to the increase in demand for these items, associated with the Christmas holidays, unusual increase in vegetable and starchy food prices in the final two months of the calendar year are often triggered by unfavourable weather conditions ...," said BOJ.
"Given the favourable weather and the absence of a hurricane this year, it is anticipated that the price movements of agriculture items will be relatively benign in these months."
December Inflation
- 2000 -0.7%
- 2001 0.2%
- 2002 0.5%
- 2003 0.8%
- 2004 0.6%
- 2005 0.1%
- 2006 0.4%
- 2007 2.5%
- 2008 0.0%
- 2009 1.1%
- 2010 1.4%
Average 0.69%