Inflation still a major concern

Central Bank Governor John Rolle had the task of confirming yesterday what we had already known as well as one of our worst fears: Inflation is up dramatically this year, it is taking a toll on our economy and things are likely to get worse before they get better.

The latest Central Bank information shows that during the 12 months to April, average consumer price inflation accelerated to 3.8 percent from 0.4 percent in the corresponding period of 2021.

Rolle said it will get even higher.

Indeed all indications are May, June and July have also seen a significant increase in inflation.

The most recent retail price index, released yesterday along with the “Monthly Economic and Financial Development” report for June, showed that for the 12 months to April there was a 13.7 percent increase in transportation, a 12.4 percent increase in communications; and a 2.3 percent increase in education over the same period a year prior.

Additionally, clothing and footwear saw a 5.6 percent increase, food and non-alcoholic beverages went up by 4.9 percent, and restaurant and hotels prices increased by 4.7 percent.

Similarly, health costs accelerated by 4.3 percent; alcoholic beverages, tobacco and narcotics increased by 3.9 percent; and housing, water, gas, electricity and other fuels went up by 2.8 percent.

The only category that saw a decrease was the recreation and culture segment of the economy which slowed by 1.6 percent; and the average cost for furnishing, household equipment & maintenance remained relatively unchanged at 2.4 percent, the data showed.

For the 12 months ending June 2022, the United States, from whom we source the vast majority of our goods, saw inflation hit 9.1 percent, beyond what analysts were forecasting.

We are a country that imports most of its goods and services in one form or another, making it almost inescapable for inflation to climb near that in The Bahamas in the coming months if all trends hold.

Additionally, if prices continue to increase in the US, there could be additional strain placed on our foreign reserves even as foreign principal balloon repayments loom in the medium term.

Additionally, increasing prices that do not accompany an increase in wages, threaten to put the disadvantaged in an increasingly perilous position.

That can be compounded by what was detailed as a significant slowdown in domestic home building and repairs, which employs many skilled and unskilled people in the construction industry.

“In domestic financing developments, total mortgage disbursements for new construction and repairs — as reported by banks, insurance companies and the Bahamas Mortgage Corporation—reduced by 33.8 percent ($8.2 million) to $16.1 million, extending the 6.4 percent falloff last year,” according to the last Central Bank Quarterly Economic Review March 2022.

Though commercial sector construction was up slightly, the construction market continues to be driven by foreign investment even as fears of a full-on US recession are currently being discussed.

There is the real-world impact of those planning for their retirement not being able to invest as robustly as the pressures of day-to-day living erode spending headroom they may have previously had.

Much of this is out of our control.

However, we are not powerless.

We have fortunately not felt the full brunt of the impact on the rise in fuel prices with regard to the energy sector as Grand Bahama Power Company and Bahamas Power and Light invested in prudent fuel hedging strategies that have kept prices stable.

The indication by BPL CEO Shevonn Cambridge in June that the power company would likely have to raise the fuel charge has recently been tempered by Minister of Works Alfred Sears who said no decision in that regard has yet been reached.

Creative methods for curbing the impact of rising fuel prices have either not been forthcoming by the government, which collects healthy revenues from taxes on fuel, or have been ignored by stakeholders like the public bus drivers.

The post-pandemic recovery has been an incredibly rocky ride thus far.

And it shows no signs of slowing down.

We will all have to navigate carefully our government finances, our monetary policy response, the ripple effects major decisions can cause as well as our individual personal finances.

We are certainly not in an ideal situation, but Rolle’s latest public commentary should urge everyone to pay closer attention to what is swirling around us.

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