22 July 2011
The results of the latest Jersey Retail Prices Index (RPI) report, which show that headline inflation was 4.5%, correspond with the independent Economics Unit’s published forecast for 2011. Ministers have expressed reassurance that the measure of inflation is in line with expectations.
Deputy Chief Minister, Senator Philip Ozouf, urged government, businesses and employees to focus on the RPI(Y), which shows that the increase in underlying inflation is 0.1 percentage points lower than in the previous quarter and remains below that of the UK.
He said “I am reassured to see that inflation is in line with the economic forecast we have been working to. While we are unable to control global factors, the States can continue to act responsibly by adhering to its fiscal strategy, including GST, which aims to close the structural deficit by 2013 in a manner that both allows the economy time to recover and provides the medium-term fiscal and economic stability that is critical for economic growth.
“It is important to focus on underlying inflation – with RPI(Y) the best measure – as it is less vulnerable to one-off factors, and this will continue to be the case. While there is clearly a risk to future underlying inflation from increases in commodity prices, there should be some counteracting downward pressure as the local and global economies will remain weak with only moderate economic growth this year. RPI(Y) is forecast to remain much more subdued than RPI – in the region of 3-3.5% throughout 2011 and 2012.”
The rise in the headline measure of inflation is largely due to last month’s rise in GST, which is a temporary effect and not inflationary, and Ministers have reiterated the importance of collective responsibility in keeping inflation low.
Economic Development Minister, Senator Alan Maclean, said “We must remember that everybody has a responsibility to keep inflation low: the States through managing the balance between expenditure and taxation; employers through prices; and employees through wage demands. It will be important that future wage demands reflect economic conditions and underlying inflation as measured by RPI(Y), to prevent putting jobs at risk in what are still weak local and global economies.”