Inflation edges up as household service costs rise

Monday 20 October 2014

Inflation edged up a little in the three months to September, boosted in part by rises in household services and travel costs, but food prices stayed static.

During the twelve months to September, the All Items Retail Prices Index (RPI), rose 1.9%, while the annual rates of increase calculated for the impact on pensioners and people on low incomes increased 2% and 2.1% respectively. This compares to a 2.3% increase in the UK over the same period, and a 2.5% increase in Guernsey.

The biggest increase locally was seen in household services. These include telephone and internet charges, domestic services such as cleaners and gardeners, and banking charges.

Despite global influences on price, such as commodity costs, local factors account for the differences in inflation between the UK, Jersey and Guernsey. For example clothing and footwear prices increased 7% in the UK on an annual basis, but decreased by 2% in Jersey over the same period. In contrast, the cost of Fares and other travel increased at a greater rate in Jersey (10%) in the year to September, than in the UK (3%).

Fuel and light costs show a mixed story: in the UK they increased by 4%, but decreased by 3% in Jersey. However both jurisdictions saw increases in electricity prices, up 5.6% in the UK and 1.5% in Jersey. Gas prices also rose, up 5% in the UK and nearly 3% in Jersey. The difference between the UK and Jersey's RPI fuel costs come when you look at  domestic heating oil which is used more extensively in the Island. Prices were down 10% over the year and this therefore had a bigger effect in Jersey than it did on the UK.

Another area of discrepancy can be seen in Motoring costs. A 10% hike in insurance fees in Jersey in the year to September, compared with just 1% in the UK, pushed the Island's Motoring costs up 1% overall, compared to a decrease of 2% in the mainland. Petrol and diesel also fell more in the UK, both dropping 10p per litre, whereas in Jersey they only fell by 4p and 5p respectively.

The RPI is compiled using over 500 separate goods and services. The RPI Pensioners and RPI Low Income rates are derived from expenditure information  collected in the 2009/2010 Household Spending Survey and reflects the different expenditure patterns of these types of households. This quarter's figures marks the biggest increase in RPI Pensioners since the end of 2012.

In the last ten years the highest rate of inflation in the Island was seen in September 2008 when 6.4% was recorded. That turned completely around as the recession bit, when exactly  a year later in September 2009 a negative 0.6% was recorded.

In the last quarter, food prices, alcoholic drinks, tobacco, household goods, clothing and footwear and leisure goods all remained unchanged in Jersey.