Economic Update: June Inflation Extraordinarily Low

Data released by the Statistical Institute of Jamaica (STATIN) has revealed that June’s inflation was a meagre 0.15%. That result is the lowest rate of inflation for a calendar month that diGJamaica can confirm.

jamaica_monthly_inflation
Source: STATIN

 

There have been some recordings of deflation (prices decline) during that time, but never inflation as low as 0.15%. As such inflation for the first 6 months of the calendar year is 3.84%. Inflation for the fiscal year to June is 1.11%.

Although the Memorandum of Economic and Financial Policies (MEFP ¶43) speaks to the Bank of Jamaica becoming an organisation whose main aim should be “full fledged inflation targeting” (FFIT), diGJamaica does not believe that June’s inflation rate is a reflection of this targeted policy being met. There are still numerous steps before FFIT is achieved.

However, given that MEFP ¶9 speaks to an inflation target below 8.75% trending down to 8%, the achievement of 1.11% fiscal year to date inflation (April to June 2013) is commendable. This gives diGJamaica reason to believe that the inflation target can be met. Let’s examine the April to June inflation rates for the last four fiscal years.

  1. 2010/11 – Inflation, April 2010 to June 2010 – 2.60%
  2. 2011/12 – Inflation, April 2011 to June 2011 – 2.00%
  3. 2012/13 – Inflation, April 2012 to June 2012 – 1.43%
  4. 2013/14 – Inflation, April 2013 to June 2013 – 1.11%

Clearly, the trend is downwards, but this only represents the first quarter of the fiscal year. Most of our inflation tends to occur during the middle of the fiscal year, September to December.

During the September to December period we have averaged 3.4% inflation over the last 3 fiscal years with a range from 2.05% to 4.5%. With “back to school” and Christmas on the horizon anything can happen with respect to prices.