Favourable inflation rate for first quarter of 2010 -despite El Nino conditions

GEORGETOWN -The Guyana Bureau of Statistics has issued a report announcing that for the first quarter of 2010 the economy has recorded an overall inflation rate of 0.5 per cent for the period December 2009 to March 2010.

According to the Bureau, two major factors have contributed to the low level of inflation at the end of the first quarter. These include the movement of the food sub-index and the state of fuel prices.

The report stated that for the first three months, food sub-index has been very moderate at overall 1.3 percent despite the El Nino conditions that obtained in the early months of this year.  However, there were declines in prices in some of the heavier-weighted categories, particularly the vegetable products category which declined in price by as much as -12.5percent over the first quarter.

Prices for milk and milk products declined by -5.1 percent, oils and fats by -4.0 percent and cereal and cereal products by -0.8 percent. On the other hand, price increases were recorded in some other categories with the largest price movements recorded for ‘Pulse and Pulse Products’, which increased for the quarter, by 17.0 percent.

Imported condiments and spices fuelled an increase of 14.9 percent and the price index for fruit and fruit products increased for the quarter by 16.2 percent.

The market reaction to shortages of high consumption items as bananas, cherries, oranges, dry-coconuts and limes as a result of the El Nino conditions, which triggered the increases will reverse once weather conditions become favorable. Additionally, the prices of meat, fish, and eggs also increased by 8.3 percent during the first quarter of the year.

Fuel prices, which have a ‘knock-on’ effect throughout the economy merely, had a marginal effect on the movements of two directly influenced sub-indices, namely housing and transport and communication.

The movements in fuel prices were countervailed by the -9.2 percent decline in the price of the communication sub-index, which is gasoline, as consumers continue to benefit from the robust competition in the communications market.

The report concluded that the inflation target for 2010, announced by Minister of Finance, Dr. Ashni Singh in his budget speech in February, was set at 4.0 percent. Both in the context of this year’s inflation target and in contrast to last year’s first quarter inflation rate of 0.4 percent, the inflation rate for the first quarter of 2010 thus far, has been favorable.